Stocks shot higher today at the open even though jobs related data was mixed. The averages topped after the first hour of trading and sold off for the rest of the day. The S&P 500 was virtually flat with the Dow closing up 0.3% at a five year high.
Nonfarm payrolls showed an increase of 114,000 against a consensus of 120,000. Last month’s number were revised higher from 96,000 to 142,000. Nonfarm private payrolls were up 104,000 against the estimate of 130,000. The nation’s unemployment rate was reported to be 7.8% versus an expected level of 8.1%.
Materials stocks stood out today. Continued rumors regarding consolidation in the space led to shares trading higher.
There has been a lot of talk recently on the underperformance of the transportation index. Transports were market leaders this week. Transports were up 3.1% for the week. Union Pacific has been a stand out after a recent pullback. Trucking stocks were particularly strong today.
European trading was strong today. The DJ Euro Stoxx index was up 1.8% in overnight trading. Greek, Spanish and Portuguese bond yields all fell sharply today.
Financials suffered a reversal today. Banks and brokers were again bid higher in early trading. Many of the leaders on the week gave up the gains and actually traded lower on the data. The Financial Select Sector SPDR XLF finished 3.0% higher on the week.
The homebuilding sector was up another 1% today and closed better than 4% higher for the week. BlackRock made favorable comments on the sector today. They feel that even with the large move higher the space will have improving fundamentals for another year.
Treasuries sold off sharply today as the unemployment rate dropped further than expected. The selloff in Treasuries was a signal that the fear trade is losing steam at these levels. If jobs data leads to a better equity market, bonds will be a source of funds used to make equity purchases.
Source: PFS Group
