The Nasdaq hit a new all-time high this week, while The Dow Jones Industrial Average gained 1.65 percent as financials and industrials both hit new 52-week highs. Within those sectors, iShares U.S. Broker Dealers (IAI) advanced 1.66 percent and iShares U.S. Aerospace & Defense (ITA) climbed 2.24 percent. Materials and technology also reached new highs this week.
September’s employment report was positive, despite missed expectations. The economy shed 33,000 jobs last month due to hurricane damage, versus a forecast gain of 75,000. The Atlanta Federal Reserve trimmed its third quarter growth forecast to 2.5 percent as a result.
935,000 new full-time jobs were created versus only 81,000 part-time last month, the biggest one-month increase in full-time jobs since the 1990s. Additionally, workers are moving into the labor force at an accelerating rate. The labor force participation rate climbed to 63.1 percent.
Auto sales crushed expectations at a pace of 18.6 million as cars damaged by hurricanes were replaced. Manufacturing and service PMIs were also higher than expected. The ISM Manufacturing survey hit 60.8 percent. The services survey climbed to 59.8.
Long-term interest rates held steady this week, with only Friday’s jobs report pushing the 10-year yield briefly as high as 2.4 percent before it settled back. Three-month Libor has been rising since the Fed’s meeting in September. Floating rate funds hit new 52-week highs as investors priced in rising yields.
Energy stocks pulled back this week, as we had anticipated. SPDR Energy (XLE) declined 0.74 percent. Crude oil finished the week 5 percent lower. The materials sector remains strong. SPDR Materials (XLB) rallied 1.94 percent, but may be overbought. Both steel and coal ETFs slid 0.5 percent on Friday.
Healthcare rose 1.42 percent on the week. SPDR S&P Biotech (XBI) finished the week 1.5 percent away from its all-time closing high. Pharma was the best performer on the week with SPDR S&P Pharma (XPH) returning 2.63 percent.
Catalonia’s independence referendum weighed on Spanish bonds and stocks, as well as the euro. iShares MSCI Spain (EWP) fell 2.64 percent on the week. CurrencyShares Euro Trust (FXE) declined 0.73 percent. The region could declare independence on Monday.
Monsanto (MON), Pepsi (PEP) and Costco (COST) reported earnings this week. Monsanto shares closed down on the week. Pepsi shares dipped after it beat on earnings, but missed on revenue. Costco beat earnings, but investors worried about falling margins and a decline in membership renewal rates. Shares fell 5.97 percent on Friday.