The Week In Review


[BRIEFING.COM] The stock market ended a downbeat week on a higher note as investors digested a below-consensus reading of the Employment Situation Report. The S&P 500 gained 0.3%, trimming its weekly loss to 0.4%. Additional factors that impacted today's trade included a rebound in oil, an upswing in the dollar, and leadership from the heavily-weighted industrial (+0.7%), technology (+0.7%), and consumer discretionary (+0.7%) sectors. The Dow Jones Industrial Average (+0.5%) finished ahead of the Nasdaq Composite (+0.4%) and the benchmark index (+0.3%).

Today's session began on a lower note as investors digested the newly released Employment Situation Report for April. The headline nonfarm payrolls reading (160K, consensus 207K) came in below consensus while average hourly earnings ticked higher by 0.3% ( consensus +0.3%). The report painted a conflicting picture of employment and simultaneously added to the recent string of weaker-than-expected economic data.

Furthermore, the employment data clouded investors' perception of the path of the feds funds rate. On one hand, the report showed softening in the labor market, and on the other, the report bumped the year-over-year increase in average hourly earnings to 2.5%. The fed funds futures market dropped the probability of a rate hike at the June meeting down to 6.0% before bidding it back to the previous day's probability of 13.1% by the end of the session.

The major averages ticked off their session lows in the late morning as a rebound in oil helped rally the broader market. For its part, WTI crude ended its day higher by 0.6% at $44.59/bbl. Equities extended their rally through the afternoon as heavily-weighted industrials (+0.7%), technology (+0.7%), and consumer discretionary (+0.7%) climbed the leaderboard.

By the end of the session, seven sectors were above their flat lines as materials (+0.9%), industrials (+0.7%), technology (+0.7%), and consumer discretionary (+0.7%) led. On the flipside, utilities (-0.7%), health care (-0.6%), and energy (-0.2%) rounded out the leaderboard.

The industrial sector (+0.7%) demonstrated relative strength as the Dow Jones Transportation Averages (+0.9%) trimmed its weekly decline to 1.7%. In the group, logistics companies outperformed with Expeditors International (EXPD 48.40, +0.93) and C.H. Robinson (CHRW 72.82, +1.97) gaining 2.0% and 2.8%, respectively.

In the technology sector (+0.7%), Cognizant Technology (CTSH 60.55, +2.96) gained 5.1% reporting above-consensus bottom-line results for the first quarter. Elsewhere, large cap names Facebook (FB 119.49, +1.68) and Alphabet (GOOG 711.12) gained 1.4% apiece while Apple (AAPL 92.72, -0.52) continued to see pressure. The name declined 1.1% on a weekly basis.

The heavyweight consumer discretionary sector (+0.7%) outperformed as Amazon (AMZN 673.95, +14.86) erased an early loss to finish its day higher by 2.3%. The broader sector ended its week with a gain of 0.1%, trailing only utilities (-0.7%; week-to-date +0.8%) and consumer staples (+0.5%; week-to-date +1.7%) over that period.

On the flipside, health care (-0.6%) underperformed throughout the day as biotechnology weighed. Additionally, generic drug names underperformed after Endo International (ENDP 16.17, -10.42) lowered its full-year guidance below consensus.

The U.S. Dollar Index (93.82, +0.04) rebounded throughout the day as the greenback made up ground against the euro and the yen. The euro/dollar pair finished flat at 1.1405 while the dollar lost 0.2% against the yen (107.10).

The Treasury complex ended its day on a lower note with the yield on the 10-yr note dropping three basis points to 1.78%. This compares to last Friday's settlement at 1.83%.

Today's participation was above average as more than 945 million shares changed hands on the NYSE floor.

Nasdaq Composite -5.4% YTD

Russell 2000 -2.0% YTD

S&P 500 +0.7% YTD

Dow Jones +1.8% YTD

Today's data included the Employment Situation Report for April:

Nonfarm payrolls increased by 160,000 ( consensus 207,000) versus the prior 12-month average of 232,000 and the prior 3-month average of 200,000

March nonfarm payrolls revised to 208,000 from 215,000

February nonfarm payrolls revised to 233,000 from 245,000

Private sector payrolls increased by 171,000 ( consensus 191,000)

March private sector payrolls revised to 184,000 from 195,000

February private sector payrolls revised to 222,000 from 236,000

Unemployment rate was 5.0% ( consensus 5.0%) versus 5.0% in March

The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, was 9.7% versus 9.8% in March

Persons unemployed for 27 weeks or more accounted for 25.7% of the unemployed versus 27.6% in March

April average hourly earnings were up 0.3% ( consensus 0.3%) after being up 0.2% in March

Over the last 12 months, average hourly earnings have risen 2.5% versus 2.3% in March

Aggregate earnings were up a robust 0.8%

The average workweek was 34.5 hours ( consensus 34.5) versus 34.4 hours in March

March manufacturing workweek was unchanged at 40.7 hours Factory overtime was unchanged at 3.3 hours

The labor force participation rate was 62.8% versus 63.0% in March

Total outstanding consumer credit increased by $29.6 billion in March after increasing a downwardly revised $14.2 billion (from $17.3 billion) in February. The consensus estimate for March was $18.0 billion.

The growth in March was powered by an $18.6 billion increase in nonrevolving credit. Revolving credit increased by $11.1 billion.

In the preceding 12-month period leading up to March, consumer credit had risen by an average of $18 billion.

In March, consumer credit increased at a seasonally adjusted annual rate of 6.5%.

There is no economic data of note scheduled for release on Monday.  However, China's Trade Balance Report for April will be released at 10:00 PM ET on May 7.


Week in Review: Two in a Row

The stock market registered its second consecutive weekly retreat, slipping back to levels from early April. The S&P 500 surrendered 0.4% for the week, trimming its 2016 gain to 0.7%. The Nasdaq Composite underperformed, falling 0.8% to extend its year-to-date decline to 5.4%.

The trading week was highlighted by the release of the last heavy batch of first-quarter earnings and the Employment Situation report for April.

With regards to earnings, more than 85.0% of S&P 500 components had delivered their results through the end of the week. Overall, blended earnings were down 7.1% with most sectors registering declines while consumer discretionary (+19.1%), telecom services (+16.6%), and health care (+7.2%) saw blended earnings growth.

As for the April Employment Situation Report, it missed headline expectations (160,000; consensus 207,000), but average hourly earnings increased an in-line 0.3%, which prevented the Dollar Index from swooning. The index ended the week higher by 0.9% after marking a fresh 2016 low on Tuesday.

The release of the April Employment Situation report briefly reduced the chance of a rate hike in June to 6.0% from 13.1%, as ascertained by the fed funds futures market. However, the fed funds futures market was once again pricing in a 13.1% chance of a rate hike in June by the end of Friday's session. The fed funds futures market is still pricing in a 50.0%+ chance of a rate hike taking place at the policy meeting in December.