Wall Street continues its winning streak for the second straight session with all three major stock indexes closing in positive territory on Friday. Investors’ ignored trade conflict between the United States and China as strong job additions for June indicated that fundamentals of the U.S. economy remain robust. This reduces concerns that United States is in the late stage of economic expansion offering little sweetness for market participants. Healthcare stocks gain the most as a record-breaking performance by Biogen lifted the entire sector.
The Dow Jones Industrial Average (DJI) closed at 24,456.48, up 0.4%. The S&P 500 Index (INX) increased 0.9% to close at 2,759.82. The Nasdaq Composite Index (IXIC) closed at 7,688.39, gaining 1.3% or 101.96 points. A total of 5.3 billion shares were traded on Friday, lower than the last 20-session average of 6.98 billion shares. Advancers outnumbered decliners on the NYSE by 2.99-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 2.32-to-1 ratio. The CBOE VIX decreased 10.7% to close at 13.37.
How Did the Benchmarks Perform?
The Dow rose 0.4% with 23 of the 30-stock index closed in the green while 7 traded in the red. During the trading, the blue-chip index rallied up to 164 points before closing at 99.74 points higher.
The S&P 500 gained 0.9% led by 1.4% rise in Health care Select Sector (XLV) and 1.2% increase of Technology Select Sector SPDR (XLK). Notably, all 11 sectors of the benchmark index ended in positive territory. Within the healthcare sector, the share price of Biogen Inc. (BIIB - Free Report) increased 19.6% - its biggest gain since February 2004 – following announcement of positive results from a phase 2 trial of its Alzheimer's drug BAN2401.
Likewise, the tech-heavy Nasdaq Composite gained 1.3% or 101.96 points due to strong showing by the large tech stocks such as Apple Inc. (AAPL - Free Report) , Microsoft Corp. (MSFT - Free Report) and Facebook Inc. (FB - Free Report) . Facebook carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Robust Labor Market Data
On Jul 6, the Department of Labor reported that the U.S. economy added 213,000 non-farm jobs in June outpacing the consensus estimate of 196,000. Moreover, the Bureau of Labor Statistics revised April's job additions from 159,000 to 175,000 and May's from 223,000 to 244,000. Together, these two months added 37,000 more jobs than initially stated.
Unemployment rate has increased from 3.8% in May to 4% in June. However, the rise in unemployment rate is primarily due to 0.2% increase in the labor force participation rate. In June, 601,000 Americans re-entered in the job market. Professional and business services sector added highest number (50,000) jobs followed by manufacturing (36,000), Health care (25,000) and construction (13,000).
Notably, average wage rate rose marginally by 0.2% to 2.7% on a year over year basis. This was lower than the consensus estimate of 2.8%. However, low-wage hike indicates that hyper inflationary expectations are overblown which may enable the Fed to follow a steady state rate hike policy.
The Commerce Department reported that the trade deficit of the United States declined 6.6% in May. This figure is the lowest in 19 months. Trade deficit in May reduced to $43.1 billion from a revised $46.1 billion in April. May reading was also lower than the consensus estimate of $44.4 billion. Exports were up 1.9% to a record $215.3 billion while imports rose marginally by 0.4% to $258.4 billion.
Despite trade-induced volatility, Wall Street ended up in appositive note in the first week of July. All three major stock indexes closed in green reversing two straight weekly losses. The Dow, S&P 500 and Nasdaq Composite gained 0.8%, 1.5% and 2.4%, respectively.
Markets closed slightly higher on Monday. The initial decline owing to uncertainty revolving around President Trump’s trade policy was reversed by a rally in tech stocks. This saw all the three indexes ending the day in positive territory after surviving a choppy trading session.
Markets closed lower on Tuesday as a selloff in tech stocks pared earlier gains made by energy stocks. Trade war fears continued to haunt investors who felt jittery leading to huge selloffs. This saw all three major indexes ending in negative territory. However, on Thursday, markets closed higher lead by a rally in tech stocks. All three major indexes ended in the green.
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