Stocks traded slightly lower following Friday’s release of the monthly jobs report. 156,000 jobs were created in September, unemployment claims rose slightly to 5 percent and hourly wages increased by 0.2 percent. While new jobs fell short of expectations, the overall data was well within the Fed’s target range for a December interest rate hike, which the market has largely priced in.
Government bonds were lower this week, however, West Texas Intermediate Crude breached $50 for the first time in four months in response to a significant drawdown in inventories and continued news of OPEC’s efforts to curtail production. Shares of the Energy Select Sector SPDR ETF (XLE) were marginally higher on the week. The SPDR Standard & Poor’s 500 index ETF (SPY) ended the week slightly lower. While the dollar index was up by more than 1 percent, gold was almost 5 percent lower. SPDR S&P Regional Banking (KRE) gained more than 1 percent and SPDR Financials (XLF) saw a small gain.
U.S. government bonds fell for five straight sessions based on reports that the European Central Bank (ECB) would taper its quantitative easing program. The central bank quickly denied the story and reiterated its commitment to expanding the program if necessary. The number of Americans filing for first time unemployment benefits was also a factor in the downtick in bond prices. The 249,000 applicants announced Thursday was one of the smallest figures in 43 years. The strengthening job market has led investors to believe that the Federal Reserve is more likely to raise interest rates at its December meeting. On Wednesday, Jeffrey Lacker, president of the Richmond Federal Reserve, said that current economic conditions provided a strong case for raising short-term rates. The odds of an interest rate hike rose to 64 percent. The price-per-share of the SPDR Financial Select Sector ETF (XLF) increased 1.5 percent.
The ISM manufacturing report for September came in at 51.5, slightly below the 52 forecast by economists. Wednesday’s nonmanufacturing report, however, dramatically exceeded expectations with an increase to 57.1 versus an anticipated 52. This was the largest month-over-month increase ever recorded. Despite generous Labor Day deals, light vehicle sales dipped in September. While construction spending unexpectedly fell for the second straight month, mortgage applications rose 2.9 percent. Key economic and monetary reports from overseas revealed that UK manufacturing rose at its fastest pace in two years. The UK services PMI figure also beat expectations as the country continues to shrug off any fears over Brexit. On Tuesday, the markets heard that Japanese consumer confidence rose for the second consecutive month to a 3-year high.
This week, investors received earnings news from Darden Restaurants, Micron Technologies, Monsanto and Yum! Brands. Casual dining conglomerate Darden (DRI) reported better-than-expected earnings. Although the share price initially spiked higher, they later sold off to remain unchanged. On Tuesday, Micron Technologies (MU) also reported better-than-forecast earnings. The company narrowed its loss for the quarter. After selling off on the news, shares of MU rebounded to finish the week unchanged. Ahead of its sale to chemical giant Bayer AG (BAY), Monsanto (MON) reported better-than-expected fourth quarter earnings. The company delivered earnings per share of 7 cents versus a forecast loss of 5 cents. Poor sales in China caused shares of Yum! Brands (YUM) to fall 1.6 percent, disappointing investors on Thursday.