Closing Market Summary: Stocks Climb Despite Weakness in Technology
The S&P 500 (+0.6%) registered its fifth consecutive advance despite seeing some volatility during the first half of the session.
Equity indices opened in positive territory after the September nonfarm payrolls report missed expectations (148K actual, 183K consensus). While the disappointing report underscored the subpar condition of the labor market, participants did not appear too concerned with the news knowing the Federal Reserve has pledged to maintain its loose monetary policy until conditions improve notably.
The market's response to the jobs report was a reflection of the belief that the Fed would not reduce the size of its asset purchases in the immediate term. On that note, Treasuries and gold rallied while the dollar sold off. The 10-yr yield fell nine basis points to a three-month low of 2.52% while gold futures jumped 1.9% to $1340.20 per troy ounce. Elsewhere, the Dollar Index lost 0.6%, ending at its lowest level since early February.
Nine of ten sectors posted gains while technology (-0.2%) underperformed after enduring some late-morning weakness. The tech sector fell from highs to lows during the first 90 minutes of the session as momentum names like Facebook (FB 52.68, -1.18), LinkedIn (LNKD 244.95, -4.84), and Yelp (YELP 69.41, -1.65) sold off. Netflix (NFLX 322.52, -32.47) also displayed weakness, reversing sharply from an earnings-driven gain of almost 10.0%.
Also of note, Apple (AAPL 519.87, -1.49) shed 0.3% after its latest product refresh event was met with a sell-the-news reaction after the stock rallied 5.1% over the past week.
Even though the tech sector briefly pressured the Nasdaq into the red, the S&P was underpinned by several influential groups like consumer discretionary (+0.7%) and energy (+0.7%). Interestingly, the energy sector rallied even as crude oil fell 1.4% to $98.30 per barrel.
Three of four countercyclical sectors outperformed as consumer staples, health care, and utilities advanced 1.4%, 0.9%, and 1.3%, respectively. Trading volume was in-line with average as just over 750 million shares changed hands on the floor of the New York Stock Exchange.
Looking back at today's remaining data, private payrolls added only 126,000 jobs in September after adding an upwardly revised 161,000 (from 152,000) in August. The consensus expected private payrolls to increase by 183,000. Aggregate wages rose 0.2% in September as hourly earnings increased 0.1% and the average workweek remained at 34.5 hours. While that is not as strong as we would like, it is enough to keep consumption spending moving upward. The unemployment rate fell to 7.2% from 7.3%.
The August net long-term TIC flows report indicated an $8.9 billion outflow of foreign capital from U.S. denominated assets. This follows the prior month's $31.1 billion inflow.
Separately, construction spending increased 0.6% in August following a big upward revision (1.4% from 0.6%) in July. The consensus expected construction spending to increase 0.4%.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while September export prices ex-agriculture and import prices ex-oil will be released at 8:30 ET. The day's data will be topped off with the 9:00 ET release of the August FHFA Housing Price Index. On the earnings front, Boeing (BA 122.48, +1.01), Caterpillar (CAT 89.17, +1.47), and WellPoint (WLP 88.43, +0.83) will report their results before the opening bell.