Benchmarks were catapulted to a new high following a better-than-expected non-farm payroll report. The unemployment rate was at its lowest level in more than four years. While the Dow Jones reached a new high, the S&P 500 closed just shy of its all time high. All the top ten S&P 500 industry groups finished in the green, consumer discretionary stocks being the biggest gainers.
The Dow Jones Industrial Average (DJI) gained 0.5% to close the day at 14,397.07. The S&P 500 increased 0.5% to finish Friday’s trading session at 1,551.18. The tech-laden Nasdaq Composite Index gained 0.4% to end at 3,244.37. The fear-gauge CBOE Volatility Index (VIX) dropped 3.6% to settle at 12.59. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.27 billion shares, below the daily average of 6.48 billion shares. Advancing stocks outnumbered the decliners. For the 64% that advanced, 32% declined.
The Dow closed at a new high on Friday following encouraging job data. Last week, the Dow and the S&P 500 gained 2.2% each while the Nasdaq increased 2.4%. This year, the Dow, the S&P and the Nasdaq have gained 9.9%, 8.8% and 7.5% respectively. The S&P 500 in just 0.9% shy of breaching its highest level. A recovery in the housing market, encouraging employment figures and robust corporate earnings were responsible for the rally. The Federal Reserve’s support to the economic stimulus package also added fuel to the investor sentiment. Following positive sentiment in the markets last week, the CBOE volatility index dropped 18% over the week to its lowest level since April 2007.
Encouraging jobs data acted as a catalyst to Friday’s Bull Run. According to the U.S. Department of labor, total non-farm payroll data in February increased by 236,000. This figure was well above the consensus estimate of 161,000. As a result of increased hiring in February, the unemployment rate declined unexpectedly to 7.7% from 7.9%. This was above the consensus estimate of 7.9%. In February, professional and business services added 73,000 jobs, construction sector hired 48,000, health care added 32,000, information sector added 20,000 and retail trade added 24,000. Positive job numbers offset the effect of the automatic spending cuts implemented by the Congress on March 1.
Meanwhile, data released by the Federal Reserve showed that 17 out of 18 country’s largest banks have the capacity to withstand severe economic conditions, since they possess sufficient capital. The only bank which could not pass the stress test was Ally Financial Inc.
Meanwhile, according to the U.S. Department of Commerce, January 2013 sales of merchant wholesalers, excluding manufacturers’ sales branches and offices, were recorded at $415.4 billion. This was 0.8% lower than December’s figure but up 3% year over year. In January, total inventories of merchant wholesalers, excluding manufacturers’ sales branches and offices, on an adjusted basis was $504.4 billion, up 1.2% from the December’s figure and 6.5% year over year. Data for inventories came in above the consensus estimate of 0.4%.
Consumer discretionary stocks were the major gainers among the top ten S&P 500 groups. The Consumer Discretionary SPDR (XLY) gained 1.1%. Stocks such as Comcast Corporation (NASDAQ:CMCSA), the Home Depot, Inc. (NYSE:HD), the Walt Disney Company (NYSE:DIS), Amazon.com, Inc. (NASDAQ:AMZN) and McDonald's Corporation (NYSE:MCD) gained 1.0%, 1.6%, 1.9%, 0.1% and 1.7%, respectively.