Stocks Soar After Non-Farm Payrolls Report

The highly-anticipated June non-farm payrolls report from the Bureau of Labor Statistics sent stocks skyward after beating economists’ expectations by 18 percent. Economists had been anticipating an increase of 165,000 new, non-farm payroll jobs in June. The BLS report indicated that 195,000 new jobs were added during the month. Beyond that, May’s total was revised upward from 175,000 to 195,000 and April’s figure was also revised upward from 149,000 to 199,000 new jobs.

Just before 10:00, the major stock indices retreated after Jan Hatzius, chief economist at Goldman Sachs, expressed his belief that the FOMC would advance the timetable for its phase-out of the quantitative easing program. Hatzius expects that the first cutback to the Fed’s bond-buying program will be announced at the September FOMC meeting, when a $20 billion reduction in Treasury purchases would occur.

Stocks rebounded abruptly at noon when the lunchtime crowd felt encouraged that the economy was getting strong enough to move along on its own, without the Fed’s “training wheels”.

The Dow Jones Industrial Average (DIA) gained 147 points to finish Friday’s trading session at 15,135 for a 0.98 percent advance. The S&P 500 (SPY) jumped 1.02 percent to close at 1,631.

The Nasdaq 100 (QQQ) climbed 0.74 percent to finish at 2,963. The Russell 2000 (IWM) skyrocketed 1.44 percent to end the day at a record-high closing level of 1,005.39.

In other major markets, oil (USO) soared 2.01 percent to close at $36.56.

On London’s ICE Futures Europe Exchange, August futures for Brent crude oil advanced by $2.05 (1.95 percent) to $106.96/bbl. (BNO).

August Gold Futures declined by $30.40 (2.43 percent) to $1,221.50 per ounce (GLD).

Transports had the pedal to the metal on Friday, with the Dow Jones Transportation Average (IYT) accelerating 1.57 percent.

In Japan, yen weakness brought another good day for the nation’s exporters as Mazda, Nippon Sheet Glass and Nintendo were among the top-performing exporters which helped the Nikkei 225 Stock Average jump more than 2 percent on Friday. The yenny remained weaker than 100 per dollar throughout the session, dropping as low as 100.45 per dollar. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average soared 2.08 percent to 14,309 (EWJ).

In China, the solar sector led the advance on Friday, as lower materials costs were expected to bring a highly-profitable second quarter for the industry. The Shanghai Composite Index advanced 0.05 percent to close at 2,007 (FXI). Hong Kong’s Hang Seng Index jumped 1.89 percent to finish the session at 20,854 (EWH).

Friday was another one of those days when European stocks really did change course as a result of America’s economic news (VGK). A review of the charts reveals that the major European stock indices had been doing fine until America’s Bureau of Labor Statistics released a better-than-expected June non-farm payrolls report, immediately raising fears that the strong result would motivate the Fed to begin the dreaded taper ASAP. The prediction by Jan Hatzius of Goldman Sachs, that the September meeting of the FOMC would bring a $20 billion cut to the Fed’s bond-buying program, raised fears that a slowdown of America’s liquidity pump could slacken demand for European exports to the United States.

The Euro STOXX 50 Index ended the week with a 1.91 percent swoon to 2,596 – dropping back below its 200-day moving average of 2,634. Its Relative Strength Index is 44.05 (FEZ).

Technical indicators reveal that the S&P 500 finally broke through the overhead resistance imposed by its 50-day moving average of 1,625 after closing at 1,631. Its Relative Strength Index increased from 49.52 to 54.48. Although the MACD remains below the zero line, it has now crossed above the signal line, suggesting a likely advance.

For Friday, all sectors were in positive territory except for the utilities sector, which declined 0.29 percent. The technology sector made the biggest gain, jumping 1.80 percent.

Consumer Discretionary (XLY): +1.08%

Technology: (XLK): +0.65%

Industrials (XLI): +1.57%

Materials: (XLB): +0.68%

Energy (XLE): +1.24%

Financials: (XLF): +1.80%

Utilities (XLU): -0.29%

Health Care: (XLV): +1.37%

Consumer Staples (XLP): +0.25%

Bottom line: Stocks finished the week with big gains, sending both the Dow Jones Industrial Average and the S&P 500 above their 50-day moving averages after the better-than-expected non-farm payrolls report for June. The 50-day moving averages had been providing significant overhead resistance for both indices since June 21.

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