Dow Retakes 21,000 on Strong Job Gains

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A labor market reacceleration in April helped drive the unemployment rate down to 4.4% — a level not seen since the dot-com bubble was in full effect — boosting Wall Street’s confidence and lifting the Dow Jones Industrial Average back over the 21,000 level.

The move caps the quietest eight-day stretch in the market since 1952 as volatility disappears despite commodity carnage in China, political machinations in Washington, and the growing specter of another interest rate hike from the Federal Reserve next month: It’s been eight consecutive days without a move of more than 0.2%.

In the end, the Dow Jones gained 0.3%, the S&P 500 gained 0.4%, the Nasdaq Composite added 0.4% and the Russell 2000 gained 0.6%. Treasury bonds were little changed, the dollar was weaker, gold lost a touch (but silver broke its long losing streak) and crude oil gained 1.5% after overnight weakness.

Volume was in-line with recent trends while breadth was heavily positive, with 2.7 advancers for every declining issue on the NYSE. Energy led the way with a 1.6% gain (despite more oversupply concerns on a rising U.S. drilling rig count) while financials were the laggards, down 0.1%.

Zynga Inc (NASDAQ:ZNGA) gained 12.7% on a big earnings beat on user metric acceleration and expense control. Forward guidance was strong. Herbalife Ltd. (NYSE:HLF) reported an earnings beat, lifting shares 11.6%. And CBS Corporation (NYSE:CBS) shrugged off some of the recent weakness in the media space to rise 2.1% on a top- and bottom-line beat.

On the downside, LendingClub Corp (NYSE:LC) fell 5.6% on a mixed performance in the first quarter, with revenues up but loan originations down. Guidance was weak. International Business Machines Corp. (NYSE:IBM) fell 2.5% after Warren Buffett told CNBC that he sold about a third of his stake in the company on valuation concerns.

The big economic news of the day: Non-farm payrolls expanded by 211,000 (versus the 185,000 expected) compared to the 79,000 jobs added in March. The result pushed the unemployment rate down to 4.4% (from 4.6%) for the lowest reading since May 2001 and below the Fed’s 4.7% estimate of “full employment” — a condition that should eventually lead to upward pressure on wages and downward pressure on corporate profit margins.

Indeed, there were relatively few entrants into the labor market: The pool of available workers fell to 12.8 million from 13 million. The labor participation rate fell slightly to 62.9%.

Outside of the job gains, however, the economy continues to display unevenness. The Citigroup Economic Surprise Index — which measures where the data is coming in relative to expectations — has now dropped for seven straight weeks to its lowest level since October. The New York Fed has lowered its Nowcast estimate of second-quarter GDP growth to just 1.8%, far from the enthusiastic rebound from the 0.7% Q1 performance the bulls are pricing in.

With commodity prices crumbling and earnings expectations falling, Wall Street will need to wake up to this on-the-ground reality at some point. They’ll have plenty of opportunity next week with a heavy economic calendar including retail sales, inflation and job openings data.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/dow-retakes-21000-on-strong-job-gains/.

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