The Markets This Week

After an uneven start to the week, U.S. stocks finished on a high note, thanks to a strong June jobs report that reassured investors about the health of the U.S. consumer.

“Today’s report helped alleviate those concerns that the economy was rolling over,” Mike Ryan, chief investment strategist at UBS Wealth Management, said on Friday.

Powered by that good news, the Standard & Poor’s 500 index finished the week at 2129.90, just shy of its all-time closing record of 2130.82, set in May 2015. The index rose 32 points, or 1.53%, on Friday.

Eight of 10 sectors ended the holiday-shortened week in positive territory. The best performers were consumer-discretionary stocks, up 2.27%, and health care, which gained 1.99%. Materials, industrials, and technology also did well, each rising more than 1%. Telecommunications and energy each finished the week down a little more than 1%, and utility stocks were up slightly.

Energy stocks came under pressure as oil prices, which had rallied recently, fell back to the mid-$40s on news that oil inventories were higher than expected.

It was a solid week overall for the big U.S. stock indexes. The Dow Jones Industrial Average closed at 18,146.74, up 1.1% for the week, with all 30 of its constituents posting gains on Friday. The Nasdaq Composite, a technology bellwether, advanced 1.94%, to 4956. The gains stretched across market capitalizations; the Russell 2000 Index, a small-cap benchmark, closed at 1177, up 1.78%.

U.S. markets were closed last Monday, July 4.

THE BIG DRIVER behind Friday’s gains was the much-anticipated U.S. Labor Department jobs report. In June, nonfarm payrolls increased by 287,000, easily surpassing the consensus estimate of 180,000. The results marked a reassuring turnaround from May, when only 11,000 jobs were added.

“The job gains were broad-based outside of construction in June,” notes Jason DeSena Trennert, CEO of Strategas, an investment research firm. Trennert describes the U.S. economy as “a workhorse against a tepid global backdrop.” He adds, “Job growth is OK, but there’s still no rush for higher rates in a maturing cycle with a flattening yield curve.”

Indeed, the yield on the 10-year U.S. Treasury settled on Friday at 1.366%, a record low, as stocks sold off earlier in the week amid further concerns about the vote in the United Kingdom to exit the European Union.

Dennis DeBusschere, head of global portfolio strategy at Evercore ISI, attributes the low yields to more of a “money-flow, central-banking issue than a sign that the U.S. economy is in trouble.” With yields so low in other developed countries, U.S. Treasuries look relatively attractive, he says.

The market didn’t seem to mind that the U.S. unemployment rate ticked up to 4.9% from 4.7%; this was mainly attributed to more people entering the job market.

The jobs report was a referendum of sorts on the U.S. consumer, whose durability has been called into question by the market, given how long the current recovery has lasted.

“It was a strong enough report to reduce any recession fears that might have increased due to extended labor-market weakness,” says DeBusschere.

(Source: Barrons Online)

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