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Markets failed to sustain Friday’s initial gains, spurred by a fall in the unemployment rate, and ended mixed. The unemployment rate was at its lowest since 2009 and that helped benchmarks secure gains in the morning session. However, the benchmarks came off their highs with some apprehensions ahead of the start of earnings season. For the week though, benchmarks had a winning run and ended with gains after closing in the red for two weeks. Moreover, the Dow notched up its highest level since December 2007.
The Dow Jones Industrial Average (DJI) ended 0.3% higher at 13,610.15. The Standard & Poor 500 (S&P 500) slipped a mere 0.03% or 0.47 points to close Friday’s trading session at 1,460.93. The tech-laden Nasdaq Composite Index was down 0.4% and closed at 3,136.19. The fear-gauge CBOE Volatility Index (VIX) slipped 1.5% to settle at 14.33. Total volumes on the New York Stock Exchange were 3.18 billion shares. The advance and decline ratio on the NYSE was even; as for 49% stocks that gained, an equal percentage of stocks ended in the red.
The big news for the day was the government’s non-farm payroll numbers. The non-farm payroll gains were in line with expectations, but the encouraging side to the report came from the positive revisions to the preceding two months data and unemployment rate dropped to its lowest since 2009. The U.S. Bureau of Labor Statistics reported that total non-farm payroll employment was up by 114,000, in line with consensus estimates. Apart from healthcare, transportation and warehousing, the other sectors showed little change. As for the positive side, the change in total nonfarm payroll employment was revised higher both for July and August. While July’s figures were revised up from 141,000 to 181,000; August’s figures went up to 142,000 from 96,000.
However, the biggest positive for the market was the fact that unemployment rate dropped by 0.3% to 7.8% last month. Not only was this well below consensus estimates of 8.2%, but the unemployment rate dropped below 8% for the first time in almost four years. In September, the number of unemployed persons fell by 456,000. Further, the report noted: “The number of job losers and persons who completed temporary jobs decreased by 468,000 to 6.5 million…The number of persons unemployed for less than 5 weeks declined by 302,000 over the month to 2.5 million”.
The report did have a lot for the financial markets, but also had implications for the political arena. While President Barack Obama said: “This country has come too far to turn back now,”; Republican candidate Mitt Romney said: “This is not what a real recovery looks like”.
The non-farm payroll data comes hot on the heels of the Automatic Data Processing’s (NASDAQ:ADP) National Employment Report and initial claims data. On Wednesday, ADP data revealed that U.S. companies added 162,000 jobs in September, higher than the expected 143,000. On Thursday, the U.S. Department of Labor reported that seasonally adjusted initial claims for the week ending September 29 rose 4,000 from the prior week to 367,000, just shy of the consensus estimates of 368, 000.
As mentioned earlier, benchmarks failed to sustain the gains. The Dow was up almost 86 points before dropping lower. The third quarter earnings season is about to kick off and Alcoa, Inc. (NYSE:AA) will be reporting its results on Tuesday. Certain market experts said that the earnings season might not be encouraging enough for the markets. Through the week, financial bellwethers including Wells Fargo & Company (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) will be reporting their results.
Coming to the sectors, the technology sector had a bad run. The Technology Select Sector SPDR (XLK) fell 0.5%. Tech bellwether Apple Inc. (NASDAQ:AAPL) slumped 2.1% and other stocks such as NetApp Inc. (NASDAQ:NTAP), Oracle Corporation (NASDAQ:ORCL), Microsoft Corporation (NASDAQ:MSFT), Red Hat, Inc. (NYSE:RHT) and Hewlett-Packard Company (NYSE:HPQ) dropped 1.5%, 1.6%, 0.6%, 1.1% and 1.4%, respectively.