Better-than-expected non-farm payroll numbers overshadowed investor concerns about the Fed tapering its bond buying program, lifting benchmarks higher on Friday. Major indices finished in the green in a holiday-shortened week. Aluminum giant Alcoa will officially kick off the second quarter earnings season on Monday after the market closes. In the later part of the week, major companies from the banking sector are expected to report their quarterly results. The financial sector was the biggest gainer among the S&P 500 industry groups. Utilities stocks were the only losers.
The Dow Jones Industrial Average (:DJI) gained 1.0% to close the day at 15,135.84. The S&P 500 added 1.0% to finish Friday’s trading session at 1,631.89. The tech-laden Nasdaq Composite Index rose 1.0% to end at 3,479.38. The fear-gauge CBOE Volatility Index (:VIX) tumbled 8.1% to settle at 14.89. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 4.9 billion shares, significantly lower than 2013’s average of 6.4 billion shares. Advancing stocks outnumbered the decliners. For the 53% that advanced, 45% declined.
The Dow Jones gained 1.5%, the S&P 500 rose 1.6% and the Nasdaq added 2.2%, over the last week. The previous week’s gains were primarily driven by encouraging domestic reports. When the government reported healthy numbers on the job market, investors were confused as to how to react to this report. Benchmarks opened higher but declined as the day progressed. Better-than-expected non-farm payrolls numbers increased investor concerns about the Fed slowing its bond buying program. But markets recovered after investors ultimately accepted that the report was a positive indication for the economy. The S&P 500 posed its best weekly performance in the last three weeks.
According to the U.S Department of Labor, the U.S economy added 195,000 jobs in the month of June. This was considerably higher than the consensus estimate of 162,000. Increase in employment in the previous month was primarily boosted by strong hiring from leisure and hospitality, professional and business services, retail trade, health care, and financial activities. Leisure and hospitality added 75,000 jobs whereas employment in professional and business services increased by 53,000. Retail, health care and financial activities added 37,000, 20,000 and 17,000 jobs respectively. But the unemployment rate remained unchanged at 7.6%. This was marginally higher than the consensus estimate of 7.5%.
Encouraging reports from the private and the government sector on the job markets is indicative of a healthy job market. In the previous week, a report from the ADP Research Institute revealed that a total of 188,000 people were added to the private sector in the month of June. Improvement in the job market is boosted by consumer spending and the recovery in the housing sector. Consumer confidence touched its highest level in more than 5 years.
On the earnings front, Alcoa Inc. (NYSE:AA) is scheduled to report its quarterly results after the close of markets on Monday. Banking giants JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) are due to report quarterly results on Friday. Investor attention will turn to the earnings season from this week.
The financial sector was the biggest gainer among the S&P 500 industry groups and the Financial Select Sector SPDR (XLF) gained 1.8%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C) and Goldman Sachs Group Inc (NYSE:GS) added 2.3%, 2.1%, 1.8%, 1.8% and 1.9%, respectively.
The utilities sector was the only loser among the S&P 500 industry groups and the Utilities SPDR (XLU) lost 0.5%. Stocks such as Public Service Enterprise Group Inc. (NYSE:PEG), NRG Energy Inc (NYSE:NRG), Exelon Corporation (NYSE:EXC), Duke Energy Corp (NYSE:DUK) and Wisconsin Energy Corporation (NYSE:WEC) declined 0.4%, 0.5%, 1.1%, 0.2% and 0.1%, respectively.
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