US Stocks Cap Longest Rally Since October Amid Mixed Jobs Data
New York (Mar 6) The Standard & Poor’s 500 Index rose for a fourth day, the longest rally since October, as investors shook off data showing a decline in wages to focus on a surge in hiring that bolstered optimism the economy can weather a global slowdown.
Commodity shares advanced after the data, with energy companies in the S&P 500 pacing gains for a fourth consecutive session, the longest streak in four months. Crude rallied near $36 a barrel. Lenders also continued to support the rally, rising for the sixth time in seven days. Hewlett Packard Enterprise Co. surged almost 14 percent as quarterly results reassured investors about demand for corporate technology.
The S&P 500 climbed 0.3 percent to 1,999.99 at 4 p.m. in New York, capping a third week of gains, the best such stretch this year. The benchmark closed above its average price during the past 100 days for the first time in 2016, at its highest since Jan. 5. The Dow Jones Industrial Average added 62.87 points, or 0.4 percent, to 17,006.77, closing above 17,000 for the first time in eight weeks. The Nasdaq Composite Index increased 0.2 percent.
“The reaction would be more bullish if we hadn’t run up so much going into this report,” said Nick Kalivas, senior equity product strategist at Invesco PowerShares in Downers Grove, Illinois, which has about $100 billion in its funds. “This is a constructive number for the market. This gives investors some confidence in growth going forward.”
Data today showed employers added more workers in February than projected, though wages unexpectedly declined. The 242,000 gain followed a 172,000 rise in January that was larger than previously estimated. The jobless rate held at 4.9 percent, while average hourly earnings dropped, the first monthly decline in more than a year. Bigger wage gains are needed help move inflation closer to the Federal Reserve’s goal.
Fed officials gather for their next two-day meeting on March 15, with traders pricing in a less than one-in-10 chance the central bank will increase rates this month. The probability rose to 40 percent by mid-year following the jobs data, up from 35 percent yesterday. Odds for a December move increased to 68 percent from 64 percent.
“The headline was strong so the labor market is resilient, but the hourly earnings and manufacturing weakness should keep the Fed off the table certainly for March and maybe June,” said Steve Chiavarone, a portfolio manager with Federated Investors in New York. “One of the main things driving the volatility has been the difference between the market’s definition of a gentle hike and what the Fed thinks.”
Watching Volume
The S&P 500 has rebounded 9.3 percent from a Feb. 11 low as banks and consumer companies climbed, though the gains have come amid the weakest volume in 2016. Improving economic data and stabilizing oil prices have also helped support the rebound, along with speculation central banks will continue to provide stimulus, while some signs of inflation picking up have stepped in to temper optimism.
BMO Nesbitt Burns Inc. technical analyst Russ Visch said last week the rally was not sustainable, and pointed today to volume indicators to suggest the run was in its final phase. Visch said in a note the 10-day moving average of volume on the New York Stock Exchange was “contracting steadily” during rally, while healthy rallies have expanding volume.
The main U.S. equity benchmark closed 2.7 percent higher this week to trim its annual decline to 2.2 percent. The measure fell as much as 11 percent earlier this year amid concern over global-growth prospects and a deepening oil rout, issues that haven’t necessarily been resolved.
Source: Bloomberg
