Closing Market Summary: Positive Week Ends on a Down NoteStocks ended the week on a down note, giving back a small portion of their weekly gains. Losses were modest, however, with the S&P 500 (-0.1%) and the Dow (unch) settling just a tick below their unchanged marks. The tech-heavy Nasdaq (+0.1%) eked out a small victory, settling at yet another record high. For the week, the S&P 500 added 1.2%.
The market took the September jobs report with a grain of salt due to the effects of Hurricane Harvey and Hurricane Irma. The report showed that employment in food services and drinking places declined by 105,000--taking a toll on the nonfarm payrolls figure, which decreased by 33,000 (consensus +75K).
Average hourly earnings, which have been slow to pick up despite a tightening of the labor market, soundly beat expectations though, showing an increase of 0.5% (consensus +0.2%). This figure was also likely affected by the hurricanes, but that didn't stop the market from adjusting its rate-hike expectations.
The CME FedWatch Tool currently places the chances of a December rate hike at 93.1%, up from 77.5% on Thursday.
U.S. Treasuries ended the session in negative territory, with shorter-dated issues showing relative weakness; the yield on the 2-yr Treasury note jumped four basis points to 1.53% while the benchmark 10-yr yield climbed two basis points to 2.37%. The U.S. Dollar Index slipped 0.1% to 93.64.
Most of the S&P 500's eleven sectors finished in the red, but some of the heaviest spaces by weight--including technology (+0.3%), financials (unch), and consumer discretionary (+0.2%)--put together relatively solid performances, helping keep the broader market's loss in check.
The tech group climbed 0.3%, thanks in large part to mega-cap names like Facebook (FB 172.23, +0.99) and Alphabet (GOOGL 993.64, +8.45), which added 0.6% and 0.9%, respectively. Chipmakers were also strong on Friday, sending the PHLX Semiconductor Index higher by 0.5%.
Meanwhile, influential names like Amazon (AMZN 989.58, +8.73), Netflix (NFLX 198.02, +3.63), and McDonald's (MCD 159.60, +0.80) helped carry the consumer discretionary space (+0.2%) to victory, settling with gains between 0.5% and 1.9%. NFLX shares had a solid week, adding 9.2%.
On the flip side, the consumer staples space (-1.0%) underperformed with retail heavyweight Costco (COST 157.09, -9.98) dropping 6.0%, despite beating both top and bottom line estimates. Retail pharmacy names also tumbled after Morgan Stanley downgraded Walgreens Boot Alliance (WBA 73.20, -3.75) to 'Equal-Weight' from 'Overweight'; WBA shares lost 4.9%.
The energy sector (-0.8%) also struggled as the price of WTI crude dropped 2.9% to $49.33/bbl amid concerns of Tropical Storm Nate's potential impact on refineries around the Gulf of Mexico. Tropical Storm Nate is projected to hit the Gulf Coast this weekend as a hurricane.
Reviewing Friday's economic data, which included the September Employment Situation Report, the August Wholesale Inventories Report, and the August Consumer Credit Report:
- September Employment Situation
- September nonfarm payrolls decreased by 33,000 while the consensus expected an increase of 75,000. The prior month's increase was revised to 169,000 from 156,000.
- Nonfarm private payrolls declined by 40,000 while the consensus expected an increase of 98,000. The previous month's increase was revised to 164,000 from 165,000.
- Average hourly earnings increased 0.5% (consensus +0.2%), while the previous month's reading was revised to +0.2% (from +0.1%).
- The average workweek was reported at 34.4 (consensus 34.3). The previous month's reading was left unrevised at 34.4.
- The unemployment rate fell to 4.2% (consensus 4.4%) from 4.4% in the previous month.
- The hurricane-related noise of the September employment resonated in the headline payroll numbers, yet the most important takeaway from the report is that wage growth picked up nicely in September and should solidify the case for another rate hike in December.
- August Wholesale Inventories
- August Wholesale Inventories increased 0.9% (consensus +1.0%). The prior month's reading was left unrevised at +0.6%.
- The key takeaway from the report is that the inventory build will be a positive component for Q3 GDP growth forecasts.
- August Consumer Credit
- The Consumer Credit report for August showed an increase of $13.1 billion while the consensus expected growth of $16.0 billion. The prior month's credit growth was revised to $17.7 billion from $18.5 billion.
Investors will not receive any economic data on Monday.
- Nasdaq Composite +22.4% YTD
- Dow Jones Industrial Average +15.2% YTD
- S&P 500 +13.9% YTD
- Russell 2000 +11.3% YTD