Stocks Edged Higher Despite Weak Jobs Report; Focus on Fed

Published on Friday, 07 September 2012 18:01 Written by Christopher Lynn

New York, September 7^th (TradersHuddle.com) – Stocks were able to close in positive ground, ending the week at multiyear highs, after fluctuating in a tight range for most of the session. Investors reacted to a disappointing jobs report, which not only was below expectations but also showed a sharp drop in labor force participation. The weak data highlighted the struggles in the labor market, which is a drag in the economy, prompting fresh speculation that Ben Bernanke might be force to introduce another round of easing.

The Dow Jones Industrial Average gained 14.64 points, or 0.11%. The S&P 500 index climbed 5.80 points or 0.40%, while the NASDAQ added less than 1 point, or 0.02%.

For the week, the Dow gained 1.65%, while the S&P 500 jumped 2.23% and the NASDAQ rallied 2.26%.

The market started with modest gains despite Intel (NASDAQ: INTC) issuing downside guidance and the Labor Department releasing its jobs report for August, which painted a dismal labor market. The weak data actually supported the market and futures amid fresh speculation that it’s more certain the Fed will join other central banks around the world and provide new stimulus measures to boost the economy.

Data showed that the U.S. economy created 96,000 jobs versus expectations of 130,000. The unemployment rate ticked lower to 8.1% from 8.3%, but only after labor force participation dropped by 368,000. The report showed that for every job created, nearly 4 Americans give up looking for work. Additionally, both June and July payroll figures were revised lower.

Among the S&P 500 sectors it was a mixed bag. Materials, energy, and financials saw the biggest gains, while consumer staples, utilities, technology, and healthcare fell. Materials stocks jumped nearly 1.8% as a group amid speculation for QE 3 and after China’s planning agency gave the green light to about $150 billion worth of infrastructure projects, as the government looks to bolster its growth rate.

Cliffs Natural Resources (NYSE: CLF) rallied 14.5% to $39.91, posting the biggest gain in the sector and the second largest percentage advance in the S&P 500 Index. Other steel and commodity related names like United States Steel (NYSE: X) and Freeport McMoRan (NYSE: FCX) saw jumps of more than 8%.

In the energy sector, the ancillary names, like Alpha Natural Resources (NYSE: ANR) surged to the top of the sector and the broad market index. The metallurgical coal producer soared 16.75% to $6.90 amid speculation of increased future demand. Other coal producers, like Peabody Energy (NYSE: BTU) were also at the top of the sector, with a 10.8% gain.

Meanwhile, the Dow underperformed the S&P 500 index, dragged down by weak performances from Kraft (NASDAQ: KFT) and Intel. Kraft tumbled 5.5% in the session, logging the biggest decline in the blue chip index and the second largest percentage drop in the broad market index. The company saw downward pressure after it provided an update on its planned spin-off, saying that it expects long-term earnings growth in the mid-to-high single digits when it spins off its snacks business. Beginning October 1, 2012 the company will separate into two entities. Kraft Foods Group that will hold the North America grocery business will begin trading under the ticker “KRFT” while Kraft Foods will be renamed Mondelez International and trade under the symbol “MDLZ”.

Meanwhile, Intel dropped more than 3% after it cut its third quarter revenue guidance, citing softer than expected demand due to weak global macroeconomic environment. Several brokerage houses cut their target prices on the stock. The news weighed on other chipmakers, like Advanced Micro Devices (NYSE: AMD), which slumped to the bottom of the S&P 500, as shares fell 5.7%.

However not all was negative in the tech sector. Dell (NASDAQ: DELL) gained more than 1% in the session after announcing its first ever dividend. The PC maker will pay a quarterly dividend of $0.08 per share on October 22 to shareholders of record as October 1^st.

Apple (NASDAQ: AAPL) gained 0.62% to $680.44 amid news that it lowered orders for memory chips for its new iPhone 5 from rival Samsung, as it attempts to diversify its supply chain. Apple posted a new all-time high of $682.48 ahead of the expected launch of its iPhone 5 nest Wednesday. Apple has gained more than 70% year to date. Additionally, there were reports that the tech giant might include Internet radio on its devices and integrate the service into its iTunes store.

On reaction to the news, Pandora Media (NYSE: P), the provider of Internet radio, plunged 16.7% to $10.47.

Elsewhere, Amazon (NASDAQ: AMZN) rallied another 3% to $259.14, logging a new all-time high of $259.42, after the online retailer launched a new Kindle Fire tablet and refreshed its line of stand-alone e-readers. ThinkEquity raised its target price on the stock to $285.

lululemon athletica (NASDAQ: LULU), the designer and retailer of athletic apparel, surged 12.5% to $77.14 after it reported earnings that beat expectations on revenue that was just shy of consensus. The retailer issued upside earning guidance for the current quarter and fiscal 2013, while revenue guidance was inline with consensus.