Dow Jones up 67 to 22,093; S&P up 5 at 2,477
S&P/TSX Composite up 66 at 15,258
July non-farm payrolls: 209,000 jobs added
December rate hike now looks very likely
Yelp sells its Eat24 business to GrubHub
US blue chips had another positive session, with the Dow Jones average closing at a new high for the eighth day in a row.
The Dow closed at 22,093, up 67 points while the broader-based S&P 500 climbed 5 points to 2,477, as investors welcomed a stronger-than-expected July jobs report.
Across the border in Canada, where the health of the US economy is less of a factor, leading stocks still advanced, pushing the S&P/TSX Composite 66 points higher to 15,258.
Joshua Mahony, a market analyst at spread betting firm IG, described the non-farm payrolls data as “an overwhelmingly positive US jobs report” that has put a rate hike “well and truly on the cards for December”.
That may be the case, but investors did not seem to care too much.
“Labor force growth has picked up over the last year and is a healthy sign for continued economic growth with limits on the rise in average hourly earnings. Yet, the current pace of labor force growth is not enough, without additional productivity gains, to kick up economic growth into the 3 percent range,” predicted John Silvia, chief economist at Wells Fargo Securities.
Online recommendations site operator Yelp Inc (NYSE:YELP) was the highest profile gainer, surging 28% to US$40.05 after agreeing to sell its online food ordering & delivery business to GrubHub.
Mid-session: Dow set for eighth record close in a row
The major benchmarks were all in positive territory in lunchtime trading after better-than-expected jobs data.
The Dow Jones industrial average advanced to another high, rising 41 to 22,067, while the broader-based S&P 500 climbed 3 to 2,475.
The US economy created 209,000 jobs in July, topping predictions of an increase of around 180,000. Meanwhile, the unemployment rate eased to 4.3% from 4.4% in June.
“Solid July job gains of 209,000 and a steady rise in wages indicate continued economic growth and consumer spending. Beyond the cycle, structural unemployment issues remain,” was the verdict of Wells Fargo Economics.
Wi-Fi provider Boingo Wireless Inc (NASDAQ:WIFI) shot up 27% to US$19.18 after it posted record quarterly revenue of US$49mln for the three months to the end of June, ahead of company guidance.
Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) was wanted after it said bookings totalled US$407mln in the second quarter, which was the highest total in the group's history.
The shares hardened 15% to US$13.38.
Open: Nasdaq flat but Dow and S&P advance after buoyant jobs report
The Dow Jones headed to another new high in early deals as investors were reassured by July's jobs report.
The Dow Jones was up 9 at 22,035 after closing at a record high yesterday. The S&P 500 was up a couple of points at 2,474 but the tech-heavy Nasdaq Composite was flat.
The non-farm payrolls number was ahead of expectations; 209,000 jobs were added in July, versus expectations of an increase of around 180,000.
“After seven straight record closes, the Dow’s reaction to Friday’s solid US jobs data has been balanced rather than breathless – with much of the cheer-leading left to President Trump, but nevertheless there’s much to be reassured by in this comprehensively strong jobs print,” suggested Marcus Bullus, trading director of MB Capital.
“Yes the headline figures are impressive, both on the job creation and unemployment rate fronts, but the details are arguably more important – the participation rate is creeping up as more Americans return to work, and average wages continue their solid upward progress.
“With more Americans working, and more Americans earning more, the US’s consumer-led growth remains firmly on track – powering equities into a sustained bull run.
“Market watchers have so far been able to ignore the President’s increasingly stalled policy agenda and the tightening net of Robert Mueller’s Russia probe, but markets can only look past political developments for so long.
“With the July jobs report showing the US economy continues to power ahead, the factors most likely to derail the markets’ continuing run of confidence are now set to come from Washington rather than Wall Street,” Bullus concluded.
Investors were tucking big-time into Weight Watchers International Inc (NYSE:WTW), after the slimming products group raised its full-year guidance in results announced after the bell last night.
Underlying second quarter net income rose 44.2% to US$45.2mln from US$30.5mln the year before on net revenues that rose 10.3% to US$341.7mln from US$309.8mln.
The company raised its full year fiscal 2017 earnings guidance to between $1.57 and $1.67 per fully diluted share.
Results from Yelp Inc (NYSE:YELP) earned good reviews, prompting the stock to rise 27% to US$39.77.
The online reviews company grew revenue by 2-% from the year before while adjusted net income shot up to US$21.6mln from US$12.5mln a year earlier.
The company said it has agreed to sell its Eat24 business to online food ordering player GrubHub.
Market preview
July's US jobs data gave a small lift to stocks that were already expected to open firmer.
The non-farm payrolls number was ahead of expectations; 209,000 jobs were added in July, versus expectations of an increase of around 180,000.
The June increase was revised up from 222,000 to 231,000 while the May number was reined back to a gain of 145,000 from 152,000.
Wage growth was unchanged at 2.5% while the unemployment rate came in at 4.3%.
Spread betting quotes on the major benchmarks moved higher after the release. The Dow Jones was expected to open at around 22,092, around four points higher than the pre-jobs report level, while the expectation of the S&P 500 opening at around 2,478 was unchanged.
The initial reaction had been somewhat more enthusiastic in the foreign exchange markets.
“A lot of fuss over nothing,” was how Neil Wilson at ETX Capital described it.
“We’ve just seen wild gyrations in the market to a report that was pretty much as expected. The dollar jumped as the report was a little ahead of expectations but there is absolutely nothing in this that changes the dial on the Fed or inflation. These market moves look extremely knee-jerk and at send- time the dollar gains are being pared in short order,” Wilson revealed.
“The headline 209k was a beat, but not by much: we’d expected c180k. A couple of months above 200k is a good sign for GDP growth but on that front even if we get the odd quarter at 3-4% the overall trend is still 2-3%. On the margins at least the headline NFP number is losing relevance because the employment matters less to wages, inflation and interest rates than it used,” Wilson suggested.
James Knightley, chief international economist at finance house ING, noted that the 0.3% month-on-month increase in wages was the strongest increase in February.
“This is a positive story, but one month of stronger wage growth is not going to sway the market in terms of its thinking for Fed policy; however, next week will see the release of the PPI and CPI reports and both look set to show an increase in inflation pressures. The market is currently looking for headline PPI to rise to 2.3% from 2% (core PPI to rise to 2.1% from 1.9%) while next Friday’s CPI report is predicted to rise to 1.8% from 1.6%.
“This combination of stronger wage, producer and consumer price inflation could nudge the market into thinking that its pricing of only one rate rise over the next 18 months may be too cautious. With the activity backdrop looking reasonable and the economy adding jobs in significant numbers we are looking for a December Fed rate hike followed by two further moves next year,” Knightley revealed.
Pre-jobs report
US stocks were set to open on the front foot but all that could change with the imminent release of non-farm payrolls data.
Spread betting quotes indicated the S&P 500 was expected to open at 2,478, after easing 5 points yesterday.
The Dow Jones was tipped to kick-off at around the 22,088 level, after rising 10 points yesterday to 22,026.
As for July's jobs numbers, analysts are forecasting that 180,000 or so jobs were added to payrolls last month, down on the 222,000 added in June.
The unemployment rate is expected to remain at near 17-year lows at 4.3% - down from 4.4% in June.
“So, what’s in store for the Dow Jones and dollar this afternoon?” asks Connor Campbell, a financial analyst at Spreadex, rhetorically.
“Analysts are expecting the headline non-farm figure to shrink from 222k to 182k month-on-month, but with the unemployment rate falling back to 4.3%. Wage growth, meanwhile, is set to remain rather flaccid, with forecasts of a 0.3% increase in July compared to the 0.2% jump in June.
“If accurate – and remember, those non-farm estimates have a tendency to be way off base – it could be another difficult day for the dollar, continuing the currency’s summer from hell,” Campbell said.
Meanwhile, Craig Erlam at forex trading platform operator, said traders are yet to buy into the Fed’s plans for another interest rate hike this year, “which is hardly surprising given the data seen in the first half, particularly on the inflation front”.
“With that in mind, while the unemployment number is likely to write the headlines and the jobs number will be the initial focus, earnings growth is key to today’s report, as well as those for the rest of the year.
“Despite a number of metrics suggesting the slack in the US labour market has been significantly reduced, wage growth continues to elude the workforce, to the annoyance of the Federal Reserve. With higher wages being crucial to further progress both on the economy and its inflation target, the central bank will be hoping that the numbers start to improve, having actually softened since the start of the year.
“Should we continue to see soft wage growth and inflation running well below target as a result, the Fed may be forced to delay plans on future rate hikes and instead focus on reducing its balance sheet. Given the clear desire to get interest rates closer to 3%, this is obviously a very undesirable situation, although it should be noted that the US is well ahead of others on this,” Erlam said.