U.S. stock indexes advanced Friday to close out the first week of July higher after an employment report showed the U.S. added 222,000 jobs in June, representing the second-largest job haul of the year and underscoring that the labor market remains healthy.
The Labor Department said unemployment ticked up to 4.4% from 4.3%. Economists polled by MarketWatch had forecast a rise of 180,000 and unemployment to hold at 4.3%.
A strong rebound in beleaguered tech stocks also helped major benchmarks to secure a foothold in positive territory.
The Dow Jones Industrial Average DJIA, +0.44% climbed 94.30 points, or 0.4%, to close at 21,414.34, finishing the week 0.3% higher.
The S&P 500 index SPX, +0.64% rose 15.43 points, or 0.6%, to 2,425.18, edging up 0.1% for the week.
The tech-laden Nasdaq Composite Index COMP, +1.04% rallied 63.61 points, or 1%, to end at 6,153.08 for a weekly gain of 0.2%.
The strong payroll data “will augment the Fed’s decision to begin balance sheet reduction sooner than later,” Charlie Ripley, investment strategist at Allianz Investment Management US, said in a note. “On balance, the labor market continues to be solid and despite the softer inflation data as of late, the solid employment data should keep the Fed on course for policy normalization.”
The government employment report also indicated that readings for jobs in May and April were better than previously reported, perhaps adding more support for the Federal Reserve to continue its plan to normalize monetary policy, lifting rates at least once more in 2017.
“[A headline reading of] 222,000 and a 16,000 upward revision to last month are a lot better than people were expecting,” Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch. “Wages were slightly below expectations which has knocked down [the U.S. dollar] and boosted the Dow,” he said.
Average hourly pay rose 0.2% to $26.25 an hour in June, below expectations for a 0.3% gain. Wages have climbed a modest 2.5% in the past 12 months, but pay is still below the usual gains at this point in a cycle of expansion.
Despite lackluster wage growth, which is viewed as a proxy a for stubbornly low inflation, Cieszynski said he viewed the climb in wages as strong and unlikely to change the Federal Reserve’s monetary-policy trajectory as it looks to lift interest rates at least once more in 2017 and unwind its $4.5 trillion asset portfolio.
The yield on 10-year U.S. Treasury notes TMUBMUSD10Y, +0.76% rose to 2.38%, around its highest in eight weeks.
J.J. Kinahan, chief strategist at TD Ameritrade, said Friday’s action, with stocks climbing at the same time as government bond yields, could be viewed as a healthy sign for Wall Street. Thursday’s dynamic of bond prices sinking, pushing yields higher, as stocks also declined runs against the grain of the natural relationship between stocks, perceived as risky and haven bonds, which are typically bought as equities tumble.
“Yields are going back higher and we are finally starting to see a little separation between bonds and stocks, and we’ll see if this relationship stays because the traditional relationships have been screwed up [due to central-bank interventions],” he said.
Economics and G-20: The Fed, in its semiannual monetary policy report, forecast a gradual hike in interest rates and a winddown of the balance sheet as the economy continues its steady pace of expansion. The report comes ahead of Fed Chairwoman Janet Yellen’s testimony on Capitol Hill next week.
Oil blues: In a volatile week for oil prices, crude oil CLQ7, -2.61%slumped 2.8% on ongoing concerns that production cuts led by the Organization of the Petroleum Exporting Countries aren’t enough to balance the oil market.
A popular way to bet on home builders, the SPDR S&P Homebuilders ETF XHB, +1.50% led by LGI Homes Inc. LGIH, +5.04% and D.R. Horton Inc. DHI, +3.77% posted its best daily gain since March 1, on the heels of the employment report that showed job creation in the construction sector. Other markets: Stocks in Asia extended losses, while European stocks SXXP, -0.07%finished mostly lower.
Bond yields in Europe were relatively stable, with borrowing costs on German paper TMBMKDE-10Y, +1.97% generally flat at 0.576%.
Silver SIU7, -2.65% settled 3.5% lower to $15.42 an ounce. The metal earlier in the session tanked almost 10% to $14.34 in a flash crash that likely was due to a trading error. Gold GCQ7, -0.93% finished down 1.1% to $1,209.70 an ounce.
what we can expect
SPI Futures currently point to a slightly higher opening, currently plus 10 points
but i'd be dissapointed if we didnt end up higher than that, on the back of that jobs report
