Bulls Rack Up Another Win Ahead of Friday's Jobs Report
31-Aug-17 16:25 ET
Dow +55.67 at 21949.40, Nasdaq +60.35 at 6428.64, S&P +14.06 at 2473.10
[BRIEFING.COM] Equities moved higher once again on Thursday, extending the S&P 500's winning streak to five sessions in a row. The Russell 2000 (+1.0%) and the Nasdaq (+1.0%) finished comfortably ahead of the benchmark S&P 500 (+0.6%) while the Dow Jones Industrial Average (+0.3%) underperformed. For the month, the benchmark index ticked up 0.1%.
Investors were happy to dial back their rate-hike expectations on Thursday following yet another tepid inflationary report. The latest reading of the core PCE Price Index showed that consumer prices decelerated on a year-over-year basis in July--dropping to +1.4% from +1.5% in June--and remain well below the Fed's longer run target of 2.0%.
Treasury yields ended the day lower across the curve following Thursday's economic data with the benchmark 10-yr yield dropping two basis points to 2.12%. Likewise, the U.S. Dollar Index (92.61, -0.23) slipped, losing 0.3%. As for the fed funds futures market, the implied probability of a December rate hike now sits at 36.4%, slightly lower than where it stood at this time last week (38.7%).
In the equity market, nine of the eleven sectors settled the day in positive territory with the influential health care group (+1.7%) leading the charge after closing above its 50-day simple moving average (919.36) for the first time in three weeks on Wednesday. Biotech names showed particular strength, sending the iShares Nasdaq Biotechnology ETF (IBB 333.35, +9.03) higher by 2.8%.
Like the health care space, the top-weighted technology sector (+0.7%) also finished ahead of the broader market on Thursday as Apple (AAPL 164.00, +0.65) added another 0.4% to settle August with a monthly gain of 10.3%. The tech sector was the top-performer in the month of August, climbing 3.2% to extend its year-to-date advance to 25.3%.
The lightly-weighted materials space (+0.7%) also outperformed on Thursday, but the remaining advancers finished with gains of no more than 0.5%. On the flip side, the heavily-weighted financial space (unch) settled with the telecom services sector (-0.5%) at the bottom of the sector standings, extending its monthly loss to 1.9%.
Elsewhere, crude oil climbed 2.6% to $47.14/bbl, breaking its four-session losing streak. Tropical Storm Harvey remains a key factor in the crude and gasoline futures market as it has forced the closure of many refineries along the Texas coast. Thursday reports indicate that Motiva Enterprises' Port Arthur refinery, the biggest in Texas, may be shut down for up to two weeks.
Political news was fairly light on Thursday, but Treasury Secretary Steven Mnuchin did say the White House has a "very detailed" tax plan ready that will be released to the public by the end of September.
Reviewing Thursday's economic data, which included July Personal Income, Personal Spending, core PCE Prices, Initial Claims, August Chicago PMI, and July Pending Home Sales:
Personal income ticked up 0.4% in July (Briefing.com consensus +0.3%) after an unrevised reading of 0.0% for June. Personal spending rose 0.3% (Briefing.com consensus +0.4%), while the prior month's reading was revised to 0.2% from 0.1%. The core PCE Price Index, which excludes food and energy, increased 0.1% (Briefing.com consensus +0.1%).
The key takeaway from the report was that inflation pressures remained subdued, which suggests to market participants that expectations for another rate hike this year can also remain subdued.
The latest weekly initial jobless claims count totaled 236,000, as expected. Today's tally was above the revised prior week count of 235,000 (from 234,000). As for continuing claims, they declined to 1.942 million from an unrevised count of 1.954 million.
This report marks the 130th straight week that initial claims have been below 300,000, which is reflective of an environment in which employers are reluctant to let go of their workers.
Chicago PMI for August hit 58.9, unchanged from July and in line with the Briefing.com consensus.
All of the barometer components, with the exception of employment, were above their year-ago levels.
Pending Home Sales for July declined 0.8% (Briefing.com consensus +0.5%). Today's reading follows a revised 1.3% increase in June (from +1.5%).
On Friday, the Employment Situation Report for August will be released at 8:30 ET and has the power to jolt, or further dampen, the chances of a December rate hike. The Briefing.com consensus expects that the report will show the addition of 183,000 nonfarm payrolls, an increase of 0.2% in average hourly earnings, and an unemployment rate of 4.3%.
In addition, investors will receive several other pieces of economic data on Friday, including the August ISM Manufacturing Index (Briefing.com consensus 56.8), July Construction Spending (Briefing.com consensus 0.5%), and the final reading of the University of Michigan Consumer Sentiment Index for the month of August (Briefing.com consensus 97.1)--all of which will be released at 10:00 ET.
Also of note, August auto and truck sales will be released throughout the day.
Nasdaq Composite +19.4% YTD
Dow Jones Industrial Average +11.1% YTD
S&P 500 +10.4% YTD
Russell 2000 +3.6% YTD
