Stocks opened higher Friday thanks to stronger-than-expected data on job growth. However, sellers stepped in at noon, and the remainder of the session developed into a gradual but restrained decline. The major indices closed with losses of between 0.3% and 0.4%.
The stronger jobs data resulted in gold, Treasury bonds, utilities, healthcare and other defensive sectors — most of which had already been under pressure during the week — taking the brunt of the selling. The mind-set among traders was that the stronger jobs numbers might keep the Federal Reserve on track to raise interest rates in June rather than later.
The dollar rose, sending the euro to $1.1318, down 1.4% for the week. Crude oil for March delivery rose 2.4% to $51.69 per barrel, the largest weekly percentage gain in four years. Some of the gain, however, could be due to a United Steel Workers’ strike at several refineries, which had an impact of about 13% on U.S. refining output. Gasoline futures rose 5.4% for the week to $1.5591 per gallon. The strongest sectors for the week were financials (+4.8%) and energy (+5.4%).
The U.S. economy added a seasonally adjusted 257,000 jobs in January, which was 20,000 more than forecast. But the unemployment rate rose to 5.7% in January from 5.6% in December.
At the close on Friday, the Dow Jones Industrial Average fell 61 points to 17,824, the S&P 500 lost 7 points at 2,055, the Nasdaq fell 21 points to close at 4,744 and the Russell 2000 closed at 2,055, off 3 points. The New York Stock Exchange’s primary market traded 927 million shares with total volume of 4.2 billion shares, and the Nasdaq crossed 2 billion shares. On the Big Board, decliners outpaced advancers by 1.7-to-1, and on the Nasdaq, decliners led by 1.2-to-1.
For the week: The NYSE gained 3.8%, the S&P 500 rose 3%, the Nasdaq was up 2.4%, and the Russell 2000 gained 3.4%.
On Thursday, the S&P 500 appeared to be headed for a breakout. But then on Friday, after successfully piercing resistance at the triple top at 2,064, it reversed in the afternoon and closed 9 points under that barrier. Thus the S&P 500 confirmed that it is trading in a very narrow zone with the 50-day moving average at 2,044 as support, while resistance remains at 2,064.
Just five sessions ago, the Dow Jones reversed from its 200-day moving average on the second of two CBR buy signals. It jumped through its 50-day moving average at 17,666 and challenged the double top at 17,923, only to fall back on Friday. Despite a MACD buy signal, Friday’s pullback creates a loss of momentum for this senior index.
The small-cap stocks, as represented by the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM), closed above its triple top at $119, but barely. So far its twin CBR buy signals at the January/February lows appear to be validated. However, volume is mixed, with Friday’s down volume higher than Thursday’s breakout day — not a good sign.
The lack of momentum created by Friday’s failure to follow through is akin to an NFL team’s failure to score on the 1-yard line on third down with goal to go. In other words, it is a sign of what could be a serious loss of momentum. However, like a football team, there might be one more down in which to score. Can the offense break through, or will sellers overwhelm the buyers and take charge of the field?
Stay tuned and keep your buy orders in hand as we approach the final minutes of the game.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.