Benchmarks ended a choppy trading session in the red on Friday after investors digested a slightly weaker-than-expected jobs report. Fed officials, however, viewed that such modest jobs expansion was more than enough for a rate hike by the end of the year. For the week, all the major indexes closed lower, snapping a three-week winning streak.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) decreased almost 0.2%, to close at 18,240.49. The S&P 500 dropped 0.3% to close at 2,153.74. The tech-laden Nasdaq Composite Index closed at 5,292.40, losing 0.3%. The fear-gauge CBOE Volatility Index (VIX) soared 10.4% to settle at 14.17. A total of around 3.5 billion shares were traded on Friday on the NYSE. Decliners outpaced advancing stocks on the NYSE. For 67% stocks that declined, 29% advanced.
Modest Jobs Growth
U.S. employment report for the month of September came in below expectations, which adversely affected the broader markets. The economy added 156,000 jobs, less than the consensus expectations of 173,000. Modest jobs growth was led by hiring in healthcare, retailers and professional services. Monthly job additions averaged 192,000 in the past three months, weaker than last year’s robust additions of 229,000.
Since the number of job seekers increased more quickly than the number of jobs, the unemployment rate ticked up to 5%. About 444,000 people entered the labor force last month and 3 million over the past year. Meantime, the labor force participation rate added half a percentage point over the past year to 62.9% last month.
A tighter labor market compelled companies to pay higher wages to attract or retain employees. Hourly pay rose 0.2% to $25.79 an hour in September. The average work week also inched up 0.1 hour to 34.4 hours (read more: Details in Jobs Report Suggest More Slack in U.S. Labor Market).
Materials and industrials led the losses on Friday. The Materials Select Sector SPDR (XLB) declined 1.9%, the highest loser among the S&P 500 sectors. Key holdings from this sector including, E. I. du Pont de Nemours and Company (DD - Analyst Report) and Dow Chemical Company (DOW - Analyst Report) decreased 1% and 0.2%, respectively.
The Industrial Select Sector SPDR (XLI) decreased 1.3% and was the second biggest loser among the S&P 500 sectors. Dow components Boeing Company (BA - Analyst Report) General Electric Company (GE - Analyst Report) and 3M Company (MMM - Analyst Report) declined 0.5%, 0.7% and 0.2%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rate Hike On the Cards
Even though jobs report was short of expectations, it wasn’t enough to dissuade Fed officials from hiking rates in the near term. Federal Reserve Vice Chairman Stanley Fischer said that September’s jobs report was a “Goldilocks” scenario, indicating a rate hike is appropriate.
Cleveland Federal Reserve President Loretta Mester added that U.S. was at full employment and an increase in rates was needed. According to the CME Group’s FedWatch tool, market expectations for a December rate hike was above 60% following the jobs report.
Stocks Snap 3-week Winning Streak
For the week, the Dow, the S&P 500 and the Nasdaq declined 0.4%, 0.3% and 0.3%, respectively. Weaker-than-expected September’s jobs data weighed on the broader markets.
European Central Bank’s quantitative easing program may meet its conclusion before the scheduled time of March 2017 also dented investors’ sentiment. British Prime Minister Teresa May indicating that the process of U.K.’s exit from the European Union will start by March-end too added to the bearish sentiment.
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