Capped off by another strong Friday rally, stocks had their best week in nearly a month.
All three major U.S. averages jumped more than 1.7% on Friday following a blowout February jobs report. For the week, NASDAQ led the way with a 4.2% gain, following by the S&P 500, which rose 3.6%, and the Dow, which climbed 3.3%. Coincidentally, Friday was the ninth anniversary of the current bull market, which began on March 9, 2009. At 2,266 trading days, the rally is now the second longest on record, behind only the 3,109-day rally that began in 1987. Stocks were strong most of the week despite concerns that the rally would be derailed by a possible trade war following President Trump’s imposing tariffs on foreign-made steel and aluminum and Gary Cohn’s resignation as chief White House economic adviser.
Stocks were also higher overseas. In Europe, the major averages were up more than 3% for the week despite indications that the European Central Bank’s massive asset-purchase program may be coming to an end soon. In a policy statement, the bank dropped a long-held pledge to keep its current €30 billion ($37 billion) monthly bond-buying program going past its scheduled September end if the euro zone economy deteriorates. Stocks in Japan and China gained more than 1% on the week, getting a lift Friday after President Trump said he would meet with North Korean dictator Kim Jong Un before May.
The February jobs report exceeded expectations on just about all counts. Nonfarm payrolls grew by 313,000, the most since July 2016. That was a third more than the Street consensus forecast of 205,000, while the previous two months’ figures were revised upward by a combined 54,000. While the unemployment rate held steady at 4.1%, the labor participation rate rose to 63.0% from 62.7%, the biggest one-month gain since 2010. One additional positive for the market – if not for workers themselves – was that average hourly earnings rose 0.1% for the month and 2.6% compared to a year earlier, both lower than expectations and below January’s figures. That eased concerns about inflation overheating, which might prompt the Federal Reserve to be more aggressive about tightening monetary policy. For the week, yields on Treasury securities were up modestly, with the benchmark 10-year note closing Friday at 2.89%, up three basis points on the week.
The Fed’s Beige Book covering January and February also noted the surging job market. While “on balance, employment grew at a moderate pace,” the report also observed “persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services. Several Districts reported continued worker shortages across most sectors.” Overall, “economic activity expanded at a modest to moderate pace.” Elsewhere, the Institute for Supply Management’s nonmanufacturing index for February dipped slightly to 59.5 but beat expectations. The Commerce Department said January factory orders fell 1.4%, down from December’s 1.8% increase but in line with market forecasts.
Reports/dates/facts/links worth paying attention to over the next week:
1. March 13: Consumer price index for February.
2. March 14: Producer price index for February; retail sales for February.
3. March 15: Weekly unemployment claims; Philadelphia Fed business outlook survey for March; Empire State manufacturing survey for March; National Association of Home Builders housing market index for March.
4. March 16: Housing starts for February; industrial production for February; University of Michigan consumer sentiment index for March, first reading.