Stocks Close Mostly Higher On Positive Reaction To Jobs Report - U.S. Commentary

(RTTNews) - After ending the previous session roughly flat, stocks moved mostly higher over the course of the trading day on Tuesday. The markets benefited from a largely positive reaction to the weaker than expected September jobs report.

The major averages ended the day in positive territory but off their highs for the session. The Dow rose 75.46 points or 0.5 percent to 15,467.66, the Nasdaq edged up 9.52 points or 0.2 percent to 3,929.57 and the S&P 500 climbed 10.01 points or 0.6 percent to a new record closing high of 1.754.67.

The strength on Wall Street came on the heels of the release of a report from the Labor Department showing weaker than expected job growth in the month of September.

The report said non-farm payroll employment increased by 148,000 jobs in September compared to economist estimates for an increase of about 180,000 jobs.

While the report suggests some economic sluggishness even before the government shutdown, the data reinforced expectations that the Federal Reserve will maintain its asset purchase program at the current pace for the foreseeable future.

Rob Carnell, chief international economist at ING, said "These figures certainly do not point to the marked improvement in the economic backdrop that some FOMC members want to see before starting the taper."

"There is no sign of tightness in the labor market, so the Fed will probably feel assured in keeping QE at current levels for some time yet," he added.

With the data for the next two months likely to be distorted by the government shutdown, economists have suggested that the Fed's decision to scale back its asset purchase program could be delayed until the New Year.

The September jobs report was originally scheduled for release on October 4th but was delayed as a result of the government shutdown.

Traders largely shrugged off a separate report from the Commerce Department showing that construction spending rose by more than expected in August to reach its highest level in over four years.

Among individual stocks, shares of Netflix (NFLX) saw substantial volatility on the day after failing to sustain an early upward move. Netflix fell by 9.2 percent after reaching a record intraday high in early trading.

Netflix initially benefited from news that the video streaming service provider reported better than expected third quarter results and forecast fourth quarter earnings above analyst estimates, but traders quickly cashed in on the early rally.

RadioShack (RSH) also came under pressure after the consumer electronics retailer reported a wider than expected third quarter loss.

Meanwhile, appliance maker Whirlpool (WHR) turned in a strong performance after reporting better than expected third quarter earnings and raising its full-year earnings guidance.

Sector News

Extending a recent upward trend, gold stocks showed a substantial move to the upside on the day. The NYSE Arca Gold Bugs Index surged up by 4.4 percent to its best closing level in a month.

The strength among gold stocks came amid a notable increase by the price of the precious metal, with gold for December delivery climbing $26.80 to $1,342.60 an ounce.

Housing stocks also saw considerable strength on the day, resulting in a 2.4 percent advance by the Philadelphia Housing Sector Index. The index also reached a one-month closing high amid strong gains by M/I Homes (MHO) and Lennar (LEN).

Significant strength was also visible among biotechnology stocks, as reflected by the 2.2 percent gain posted by the NYSE Arca Biotechnology Index. Illumina (ILMN) helped lead the sector higher on upbeat earnings news.

Airline, utilities, and pharmaceutical stocks also posted strong gains on the day, while electronic storage stocks showed a notable move to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index crept up by 0.1 percent, while Hong Kong's Hang Seng Index ended the day down by 0.5 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index advanced by 0.9 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index rose by 0.6 percent and 0.4 percent, respectively.

In the bond market, treasuries moved sharply higher on the heels of the weaker than expected jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 9.7 basis points to a three-month low of 2.512 percent.

Looking Ahead

While reaction to the monthly jobs report may continue to impact trading on Wednesday, earnings news from big-name companies such as Boeing (BA), Caterpillar (CAT), and Bristol-Myers Squibb (BMY) is also likely to attract attention.