Closing Market Summary: Stocks End Strong Week on Upbeat Note
The stock market finished the abbreviated trading week on an upbeat note thanks to a boost from a June jobs report that surpassed expectations. The S&P 500 advanced 0.6% with nine sectors posting gains. As a result, the benchmark index extended its weekly gain to 1.3%.
Today's upbeat tone was set early with the June Nonfarm Payrolls report pointing to the addition of 288,000 jobs (consensus 210,000). In addition, the unemployment rate unexpectedly dropped to 6.1%.
Appropriately, the strong report gave a boost to cyclical sectors, while their countercyclical counterparts struggled a bit in the early going.
Consumer discretionary (+0.8%), financials (+0.8%), and industrials (+0.8%) paced the advance throughout the session and ended ahead of the remaining sectors. The discretionary space owed its outperformance to retailers as the group rallied broadly with the SPDR S&P Retail ETF (XRT 88.65, +1.15) climbing 1.3%. Homebuilders also posted gains, but the iShares Dow Jones US Home Construction ETF (ITB 24.94, +0.10), which added 0.4%, could not keep pace with the sector.
Elsewhere, industrials received support from transport stocks. All 30 components of the Dow Jones Transportation Average (+0.8%) finished in the green with airlines posting solid gains to follow yesterday's relative weakness. United Continental (UAL 39.88, +0.61) led the pack, climbing 1.6%.
Also of note, the financial sector padded its weekly advance to 1.3%.
On the countercyclical side, health care (+0.4%) and telecom services (+0.3%) displayed intraday losses, but returned into the green ahead of the close. The consumer staples sector (+0.6%), however, outperformed due to strength in tobacco names. Lorillard (LO 64.41, +3.26) jumped 5.3% in reaction to reports the company's merger with Reynolds American (RAI 61.56, +1.40) is on track to be announced within weeks.
Lastly, the utilities sector (-1.1%) displayed relative weakness for the third day in a row, ending the week lower by 3.2% as profit-taking continued.
Treasuries slumped in reaction to today's data, but spent the remainder of the session in a climb. The benchmark 10-yr yield inched up two basis points to 2.65%.
Economic data included June Nonfarm Payrolls, weekly initial claims, June Challenger Job Cuts, May Trade Balance, and the ISM Services report for June:
* Nonfarm payrolls added 288,000 jobs in June after adding an upwardly revised 224,000 (from 217,000). The consensus expected nonfarm payrolls to increase by 210,000
* Private payrolls were up 262,000 jobs in June after adding 224,000 jobs in May. That outpaced the consensus expectations of a 213,000 increase * The unemployment rate fell to 6.1% from 6.3%, while the consensus expected no change from 6.3%
* The decline resulted from workers finding jobs (+407,000) rather than a drop in the labor force
* Average hourly earnings increased 0.2% and hourly workweek was unchanged at 34.5 hours, as expected
* The weekly initial claims level increased to 315,000 from an upwardly revised 313,000 (from 312,000). The consensus expected the initial claims level to increase to 315,000
* Over the past few weeks, the initial claims level has settled into a range of 310,000 to 320,000 and this week's claims were no different
* The Challenger Job Cuts report for June pointed to a 20.0% year-over-year decline * The U.S. trade deficit narrowed in May to $44.40 billion from a downwardly revised $47.00 billion (from $47.20 billion) in April. The consensus expected the trade deficit to fall to $45.2 bln
* Total goods deficit fell to $63.30 billion in May from $65.70 billion in April. The services surplus increased to $18.90 billion from $18.60 billion
* The ISM Non-Manufacturing Index fell to 56.0 in June from 56.3 in May. The consensus expected the index to increase to 56.5
* Business activities softened as the related index declined to 57.5 in June from 62.1 in May as non-manufacturing businesses worked down their backlogs * The Backlog of Orders Index fell to 53.0 from 54.0
There is no economic data on Monday's schedule.
* S&P 500 +7.4% YTD * Nasdaq Composite +7.4% YTD * Dow Jones Industrial Average +3.0% YTD * Russell 2000 +3.7% YTD