Friday’s better-than-expected report on U.S. job market helped alleviate concerns that the economy is burdened by uncertainty. So, after falling for three consecutive weeks, stocks shot up as ebullient traders picked up bargains ahead of a long weekend. The rally helped the Dow average wipe off the losses for the year.
Friday’s rally sent all three major averages up at least 2.9%, as industrials led the charge. Caterpillar (NYSE:CAT) and Boeing (NYSE:BA) were among the Dow average’s highest gainers and helped send the blue-chip index up 2.93% on the week. It was Dow’s highest weekly gain in more than a month.
On Friday, the Dow average gained 128 points, or 1.2%, extending its weekly advance to 297 points. However, consumer-related stocks fell out of favor and were a drag on the 30-share index. The Nasdaq Composite index climbed 33 points, or 1.5%, and closed up 80 points, or 3.72%, on the week. The S&P 500 index added 14 points, or 1.3%, taking its weekly advance to nearly 40 points or 3.75%.
Friday’s rally was all about jobs. Although the unemployment rated edged up to 9.6%, traders were encouraged by reports that employers slashed fewer-than-expected jobs in August. The private sector added 67,000 jobs on its rolls, beating expectations for a gain of 44,000.
All 30 Dow components closed higher on the week. Among the S&P 500 components, 476 ended the week with gains. The strength in stocks was also built on better-than-estimated manufacturing reports from China and the U.S. that came earlier in the week. As traders turned to riskier bets, safe haven assets lost their sheen. The yield on US 10-years rose to 2.71% at Friday’s close from 2.65% at the beginning of the week; the US dollar dropped 1% against a basket of currencies to 82.12. Meanwhile, the measure of market’s volatility, CBOE volatility index, plummeted 8.1% to 21.31.
The risk-on sentiment sent all ten S&P 500 industry sectors higher on the week. Leading the gainers were: financials (+5.3%), basic materials (+5.2%), and industrial shares (+4.7%), followed by consumer services (+4.5%), oil and gas (+3.8%), technology (+3.5%), consumer goods (+2.7%), health care (+2.4%), telecommunications (+2.3%), and utilities (+1.7%). Financials have taken the biggest hit since the beginning of May. The KBW Bank index is down almost 10% since that time.
Asian markets were mixed today, with the Nikkei 225-stock average off 0.8% and the Shanghai composite up 0.2%; financials weighed on European shares, as the FTSE100 dropped 0.8% and the Dax fell 0.6%. this mornings US stock futures indicate a soft opening, with the DJIA likely to open 50 points in the red.
The week lacks catalysts for risk trade. Nevertheless, interest rate decisions from the Bank of Japan, the Reserve Bank of Australia, Bank of Canada and Bank of England are scheduled. Back home, President Obama is expected to pitch for additional economic stimulus efforts as the mid-term Congressional elections grow nearer.
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