Positive Reaction To Jobs Data Leads To Rally On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Friday, adding to the strong gains posted in the previous session. The markets benefited from a positive reaction to the monthly jobs report.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow jumped 165.55 points or 1.1 percent to 15,794.08, the Nasdaq soared 68.74 points or 1.7 percent to 4,125.86 and the S&P 500 surged up 23.59 points or 1.3 percent to 1,797.02.

With the gains on the day, the major averages more than offset the sell-off seen on Monday and closed higher for the week. The S&P 500 advanced by 0.8 percent, while the Dow and the Nasdaq rose by 0.6 percent and 0.5 percent, respectively.

The rally on Wall Street came on the heels of the release of the Labor Department's closely watched monthly employment report.

While the report showed a much smaller than expected increase in non-farm payroll employment, a jump in employment as measured by the household survey pushed the unemployment rate down to a new five-year low.

The report said non-farm payroll employment increased by 113,000 jobs in January following a slightly upwardly revised increase of 75,000 jobs in December. Economists had been expecting employment to climb by about 180,000 jobs.

Despite the weaker than expected job growth, the unemployment rate still edged down to 6.6 percent in January from 6.7 percent in December. The unemployment rate had been expected to come in unchanged.

With the unexpected decrease, the unemployment rate fell to its lowest level since hitting 6.5 percent in October of 2008.

The continued decrease by the unemployment rate came as employment measured by the household survey rose by 638,000 and the labor force increased by 523,000.

Chris Low, chief economist at FTN Financial, said the positive market reaction reflects "the conflict between two months of very weak non-farm payroll growth and three months of very strong household employment."

"As is occasionally the case with the employment situation report, it could take months to ferret out the truth," Low added.

Sector News

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 3.8 percent. The index regained ground after ending the previous session at its worst closing level in almost a month.

InterMune (ITMN), Nektar Therapeutics (NKTR), and Incyte (INCY) turned in some of the biotech sector's best performances.

Significant strength was also visible among gold stocks, as reflected by the 2.7 percent gain posted by the NYSE Arca Gold Bugs Index. The strength in the sector comes as gold for April delivery climbed $5.70 to $1,262.90 an ounce.

Electronic storage stocks also saw considerable strength on the day, with the NYSE Arca Disk Drive Index rising by 1.8 percent. Imation (IMN) helped lead the sector higher after reporting a fourth quarter profit compared to a year-ago loss.

Tobacco, healthcare, defense and semiconductor stocks also posted notable gains, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Friday. Japan's Nikkei 225 Index surged up by 2.2 percent, while Hong Kong's Hang Seng Index advanced by 1 percent.

The major European markets also moved higher on the day. While the French CAC 40 Index ended the day up by 1 percent, the German DAX Index rose by 0.5 percent and the U.K.'s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries saw modest strength after closing lower for three straight days. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 2.675 percent.

Looking Ahead

The economic calendar for next week is relatively light, although traders are still likely to keep an eye on reports on retail sales, industrial production, and consumer sentiment.

Trading could also be impacted by remarks by Fed Chair Janet Yellen, who is due to testify before Congress in what will be her first public comments since taking over as head of the central bank.

On the earnings front, Cisco (CSCO), Sprint (S), Applied Materials (AMAT), CVS Caremark (CVS), and PepsiCo (PEP) are among the companies scheduled to report their quarterly results next week.