Stocks Rallied after Jobs Data

Published on Friday, 03 August 2012 18:52 Written by Christopher Lynn

New York, August 3^rd (TradersHuddle.com) – Stocks surged to end the week with gains after a better than expected jobs report in July. Jobs growth topped diminished expectations from economists, easing concern over the slowdown in the U.S. economy. The data was not good enough to erase all concerns and reduce the unemployment woes, and not bad enough to bring the Fed for support.

The Dow Jones Industrial Average jumped 217.29 points, or 1.69%. The S&P 500 index rallied 25.99 points or 1.9%, while the NASDAQ surged 58.13 points, or 2%.

For the week, the Dow climbed 0.17%, while the S&P 500 gained 0.36% and the NASDAQ advanced 0.33%.

The market started the session with sharp gains above 1%, recouping all of yesterday’s losses following a better than expected July non-farm employment report. The Labor Department said that the economy added 163,000 jobs in July, which was better than the 100,000 jobs most economists expected. However, the job growth was still subpar, pushing the unemployment rate slightly higher to 8.3%.

The economic data in the U.S. helped the Dollar, spurring weakness in precious metals and risk appetite in equity markets. The ISM July Services Index reading was also supportive of the move, showing 52.6, which was slightly above the prior month’s level of 52.1. As the session progressed, participants added to positions, with the benchmark indices surging and erasing all of the losses for the week.  

All of the S&P 500 sectors jumped more than 1%. Energy, financials, and industrials rallied more than 2%, while consumer discretionary, technology, and materials gained nearly 2%.

In the energy sector, stocks benefited from a sharp rally of nearly 5% in crude oil, with the fuel settling above $91 per barrel. The sector was also influenced by earnings reports. EOG Resources (NYSE: EOG) rallied 11% to $106.75 after the company beat profit expectations by $0.18 per share on revenues that climbed 13.9% to $2.91 billion versus consensus of $2.42 billion. Meanwhile, Southwestern Energy (NYSE: SWN) tumbled to the bottom of the sector and the S&P 500, as shares slumped 4.8%. The company reported EPS of $0.26 per share, which was inline with consensus, on revenues that tumbled 21.6% from a year ago to $599.7 million. Southwestern issued cautious commentary on conference call, saying it is still managing the impact of extreme heat on its compressors and dehydration facilities.

Financials saw the strong bid following the improved picture in the labor market. Morgan Stanley (NYSE: MS) rallied to the top of the sector, with shares jumping 5.8%, while Citigroup (NYSE: C) climbed 4.7%. Also, American International Group (NYSE: AIG), the insurer, gained 1.62% to $31.34 on reaction to its quarterly results. The company reported quarterly earnings of $1.06 per share, $0.46 better than consensus, while its book value increased 5% during the quarter to $60.58.

Consumer stocks were also sought after. Interpublic Group (NYSE: IPG) surged to the top of the S&P 500, as shares rallied more than 13% on speculation France’s Publicis was considering a bid for the company.

CBS Corp. (NYSE: CBS) rallied 6% to $35.06 after reporting a quarterly profit of $0.65 per share, $0.06 above consensus, on the back of solid results from its cable networks and an increase in gross margins. Meanwhile, Viacom (NASDAQ: VIAB) gained nearly 3% after the company said that it earned $0.97 per share, $0.03 below consensus. Viacom cited weaker ad sales and poor performance at its movie studio.

Kraft (NASDAQ: KFT) logged one of the best gains in the Dow Jones Industrial Average, as shares surged 4% to $40.51 on the back of a solid earnings beat. Kraft logged a new 52-week high of $40.89 after its earnings topped expectations on revenues that fell short of consensus, due to currency headwind. While, Procter & Gamble (NYSE: PG) rallied 3% to $65.50 after saying that it earned $0.87 per share, $0.05 better than consensus. The consumer giant said that revenue was shy of consensus, as sales and margins declined. It added downside guidance for the current quarter, but also announced that it will repurchase up to $4 billion of its shares this fiscal year.

In the technology space, Hewlett-Packard (NYSE: HPQ) jumped 4%, posting the biggest percentage gain in the blue chip index, while Teradata (NYSE: TDC) surged 8% to the top of the sector on response to its quarterly results.

Apple (NASDAQ: AAPL) gained 1.3% to $615.70, slightly underperforming the move. The stock jumped 4.2% for the week, moving above $600 per share and erasing all of its losses from the big earnings miss last month on the back of chatter regarding the launch of its iPhone 5 and iPad mini sometime in September.

Elsewhere, LinkedIn (NYSE: LNKD), the social network site for Professionals, surged 16% to $108.51 on strong reaction to earnings that were inline with consensus on revenues that topped expectations. The company also provided roughly inline guidance for third quarter and the full year. Peer Facebook (NASDAQ: FB) jumped more than 5% on the news and after a report from Pivotal Research Group said that the social networking giant could step up its revenue growth with ad sales and its new ad sales model for real-time bidding. Still the week was bad for the stock, tumbling more than 12% on concern over the revenue growth and the monetization of its mobile platform.