Benchmarks finished in the green on Friday after gains in materials stocks and oil prices rally offset negative impact of disappointing job reports. Meanwhile, poor job data reduced Fed rate hike possibilities and boosted investor sentiments. However, for the week all the three key U.S. indexes closed in negative territory following discouraging economic data and lackluster earnings reports. Both the Dow and the S&P 500 posted second straight weekly losses for the first time since the week ended Feb 12. The Nasdaq registered third consecutive weekly decline for the first time since the week ended Jan 15.
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The Dow Jones Industrial Average (DJI) increased 0.5%, to close at 17,740.63. The S&P 500 rose 0.3% to close at 2,057.14. The tech-laden Nasdaq Composite Index closed at 4,736.16, gaining 0.4%. The fear-gauge CBOE Volatility Index (VIX) decreased 7.5% to settle at 14.72. A total of around 7.1 billion shares were traded on Friday, lower than the last 20-session average of 7.2 billion shares. Advancers outpaced declining stocks on the NYSE. For 62% stocks that advanced, 34% declined.
Disappointing jobs report reduced possibilities for any immediate Fed rate hike, which had a positive impact on gold prices. Gold prices increased by 1.7% or $21.70 to settle at $1,294 an ounce. Meanwhile, treasury yield declined following reduce rate hike possibility.
Moreover, oil prices increased yesterday after the wildfire in Fort McMurray, the oil city of Canada, continued to weigh on its crude production. Also, Baker Hughes (BHI – Analyst Report) reported that U.S. oil rig count declined from 332 to 328, declining for the seventh week and reaching its lowest level since October 2009. Both the WTI crude and Brent crude rose 0.8% to $44.66 per barrel and $45.37 a barrel, respectively.
Rise in gold and oil prices had a positive impact on material stocks. The Materials Select Sector SPDR ETF (XLB) advanced 0.8% and was the biggest gainer among the S&P 500 sectors. Key holdings such as Freeport-McMoRan Inc. (FCX – Analyst Report), Newmont Mining Corporation (NEM – Analyst Report), WestRock Company (WRK – Analyst Report), Praxair Inc. (PX – Analyst Report), Ecolab Inc. (ECL – Analyst Report), E. I. du Pont de Nemours and Company (DD – Analyst Report) and The Dow Chemical Company (DOW – Analyst Report) increased 4.4%, 3.9%, 1.8%, 0.7%, 1.8%, 0.9% and 0.6%, respectively.
According to the Bureau of Labor Statistics (BLS), the U.S. economy created a total of 160,000 jobs in April, significantly lower than the consensus estimate of 203,000. The tally was also considerably lower than March’s downwardly revised job number of 208,000. The Labor Department also revised down jobs growth in the previous two months by 19,000.
Moreover, the unemployment rate in April was in line with the consensus estimate and March’s rate of 5%. Further, labor force participation rate fell 62.8%, declining for the first time in 7 months as 300,000 individuals quit jobs or gave up jobs searches.
However, the average hourly earnings gained 0.3% or 8 cents in April from previous month’s figure to $25.53 per hour, in line with the consensus estimate. This was the third highest monthly gain in a year. The average hourly earnings also witnessed a 2.5% rise from the year-ago figure.
In earnings news, shares of Activision Blizzard, Inc. (ATVI – Snapshot Report) gained 8.5% after its first quarter adjusted earnings and non GAAP revenues of $0.19 per share and $908 million beat the Zacks Consensus Estimate of $0.10 and $817.7 million, respectively. Activision was the biggest gainer among the S&P 500 companies, while Endo International was the biggest loser.
Endo International plc’s (ENDP – Analyst Report) shares slumped 39.2% after reporting fiscal first quarter earnings per share (EPS) of $1.08, lower than the Zacks Consensus Estimate of $1.05. Revenues of $963.5 million also missed the Zacks Consensus Estimate of $964.4 million..
For the week, the Dow, S&P 500 and Nasdaq declined 0.2%, 0.4% and 0.8%, respectively, following losses in energy and financial services stocks. Discouraging earnings reports and weak global economic data also had a negative impact on the key U.S. indexes.
Oil prices declined during the week, following China’s growth worries and concerns over global crude supply glut. Rise in crude production in Iraq, Saudi Arabia and Iran, and weekly increase in U.S. commercial crude oil inventories raised worries over global crude oversupply. Both the WTI crude and Brent crude fell 3% and 6%, respectively. Brent crude registered its biggest weekly fall since January.
Weaker-than-expected manufacturing data of China and Eurozone’s dismal economic outlook raised global growth worries and weighed on Fed rate hike chances, which in turn resulted in sell-off of financial services stocks.
In company news, Priceline Group Inc (PCLN – Analyst Report) and L Brands, Inc. (LB – Analyst Report) registered weaker than expected quarterly earnings results. Also, Merck & Co. Inc. (MRK) missed its quarterly revenue estimates and Tesla Motors, Inc’s (TSLA) posted wider than expected quarterly loss.
However, Sysco Corporation (SYY), Pfizer Inc (PFE) and Time Warner Inc. (TWX) posted better-than-expected earnings results. Moreover, shares of Wynn Resorts Ltd. (WYNN) increased following a lower-than-expected decline in revenue last month from its Macau casino operations. Also, Amazon.com, Inc’s (AMZN) gained after Warren Buffet said that Amazon’s “accomplishments in a short time are remarkable.”
In economic news, ISM manufacturing index and non-farm business sector labor productivity decreased and initial claims increased. Rise in construction spending was lower than the consensus estimate.
However, ISM Services Index, domestic vehicle sales, total vehicle sales and new orders for manufactured goods increased and trade deficit narrowed.