Closing Market Summary: Stock Market Ends Week at Record HighThe stock market closed the week on a higher note, with the S&P 500 and the Nasdaq finishing Friday's session higher by 0.4% and 0.6%, respectively. The Dow (+0.3%) finished the day 34 points shy of the elusive 20k mark after coming within one point of the milestone early Friday afternoon.
Equity indices started the day flat after the December Employment Situation report was met with a muted reaction from investors. The stock market picked up the pace about an hour into the session, trending upwards to a record intraday high where it remained until the closing bell.
Friday's release of the December Employment Situation report alluded to the fact that the labor market is approaching full employment; job growth is slowing, while wages are ticking up. Time will tell if the Fed sticks to their proposed rate-hike schedule, which calls for three rate hikes in 2017, but the Employment Situation report certainly didn't reveal anything that would suggest a change of plans.
Today's rally was led by the technology sector (+1.0%), which was aided by chipmakers and large cap components. For instance, Apple (AAPL 117.91, +1.30), Microsoft (MSFT 62.84, +0.54), Facebook (FB 123.41, +2.74), Alphabet (GOOGL 825.21, +12.19), and Visa (V 82.21, +1.12) all added between 0.9% and 2.3%, while the PHLX Semiconductor Index finished higher by 0.8%.
Cyclical sectors did slightly better than their defensive counterparts, with three of the six growth-sensitive sectors beating the benchmark index. Utilities (+0.3%) and health care (+0.3%) were the only non-cyclical sectors to perform in line with the broader market. Health care capitalized on the biotech industry's solid showing, evidenced by the 0.9% increase in the iShares Nasdaq Biotechnology ETF (IBB 280.65, +2.54). Telecom services (-2.7%) and real estate (unch) were the only sectors to finish in the red.
Standings for the week look much the same as ten out of eleven sectors finished the week higher, with telecom services (-1.2%) bucking the trend. The week's top performer was health care (+2.9%), followed closely by real estate (+2.2%), technology (+2.4%), and consumer discretionary (+2.3%). The consumer discretionary sector's gain was particularly impressive as the sector had to overcome a poor week from retailers. The SPDR S&P 500 Retail ETF (XRT 43.76, -0.26) finished the first week of 2017 lower by 0.7% after some of its components reported disappointing holiday sales.
Conversely, small caps ended the week on a down note as the Russell 2000 fell 0.4% in Friday's session. On the week, the small-cap index added 0.7%, but underperformed relative to the S&P 500's and the Nasdaq's respective, 1.7% and 2.6% week-to-date gains. Given that the domestically-focused Russell 2000 set the pace for the post-election rally, investors may be concerned about the index's recent struggle.
The Treasury market saw stepped-up selling pressure after the 8:30 ET release of the Employment Situation report for December, but cooled off afterwards. The 10-yr yield closed the day seven basis points higher at 2.42%.
Reviewing today's economic data:
- Employment Situation Report
- December nonfarm payrolls came in at 156,000 while the consensus expected a reading of 175,000. The prior month's reading was revised to 204,000 from 178,000. Nonfarm private payrolls added 144,000 while the consensus expected an increase of 170,000. The unemployment rate held at 4.7% (consensus 4.7%).
- Average hourly earnings increased 0.4% (consensus +0.3%). The average workweek was reported at 34.3 while the consensus expected a reading of 34.4.
- The key takeaway from the December employment report is that job growth is slowing while wages are rising, which are offshoots of a labor market running near full employment.
- November trade balance showed a deficit of $45.2 billion while the consensus expected the deficit to hit $42.2 billion. The previous month's deficit was revised to $42.4 billion from $42.6 billion.
- The key takeaway from the report is that the widening deficit will be a drag on fourth quarter GDP, as the fourth quarter average of $61.9 billion for the real trade deficit is 9.4% higher than the third quarter average.
- The Factory Orders Report for November showed a decrease of 2.4% while the consensus expected a decrease of 2.1%. The October reading was revised up to 2.8% from 2.7%.
- The key takeaway from the report is that the drop in manufacturing orders was owed predominately to a large retreat in orders for the volatile nondefense aircraft and parts component. Excluding transportation, orders were up 0.1%.
Monday's economic data will be limited to the November Consumer Credit report, which will be released at 3:00 pm ET.
- Nasdaq Composite +2.6% YTD
- S&P 500 +1.7% YTD
- Dow Jones Industrial Average +1.0% YTD
- Russell 2000 +0.6% YTD