U.S. equities moved higher on Friday thanks to a better-than-expected employment situation report. Non-farm payrolls increased 235,000 versus the 200,000 that was expected. In addition, while the participate rate increased slightly, job gains were strong enough to push the unemployment rate down to 4.7%. Average hourly earnings slightly missed expectations, but hey, you can’t have it all.
In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 gained 0.3%, the Nasdaq Composite added 0.4% and the Russell 2000 ended the day higher by 0.4%.
Treasury bonds were stronger, the dollar was weaker, gold lost 0.2% for its ninth straight decline, and oil extended its recent selloff down another 1.6% on oversupply and inventory concerns. That boosted the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a gain of 4.9% on the day to bring its total unrealized gain to nearly 20% since the beginning of February.
Yield-sensitive stocks enjoyed some relief, with utilities and telecoms up 0.8% and 0.7%, respectively. Energy was among the laggards, down 0.2%.
El Pollo LoCo Holdings Inc (NASDAQ:LOCO) dropped 2.6% on light earnings and weaker-than-expected comp-store sales and tepid forward guidance. Poor weather in California was blamed. Southwest Airlines Co (NYSE:LUV) fell 0.9% after it lowered its Q1 revenue per average seat mile forecast down 2% to 3% vs. the prior 1% drop expected. Management cited a loss of traffic from softness in demand as well as poor weather in California.
I guess heavy rain keeps people from traveling or buying grilled chicken.
Looking ahead, Wall Street will have a lot to worry about next week.
The political rancor in Washington remains at a fever pitch over President Trump’s immigration ban 2.0 order, the GOP’s efforts to repeal and replace Obamacare, and more. Tensions are building in Asia, with the U.S. THAAD missile defense system being deployed to South Korea after Pyongyang launched three ballistic missiles. Moreover, South Korea’s Constitutional Court upheld a parliamentary vote impeaching its president on corruption charges.
Above all this, the Federal Reserve’s policy announcement on Wednesday is expected to feature another 0.25% interest rate hike — the second in three months — while marks a clear acceleration from the prior pace of just two rate hikes in the last 10 years. This comes despite the fact the Atlanta Fed’s GDPNow real-time measure of Q1 growth has fallen to just 1.2%.
After today’s jobs numbers, the futures market odds of a March rate hike hit 93%, up from 88.6% on Thursday.
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.
