U.S. stocks finished the final trading session of the holiday-shortened week higher, courtesy of the June labor report that seemed to tamp down some concerns of a possible acceleration to the Fed’s rate hike campaign. Some upbeat economic data aided in countering the tension in regard to global trade as the U.S. implemented its previously announced tariffs on China, which immediately retaliated with levies of its own. Treasury yields dipped and the U.S. dollar was also lower, while crude oil prices were mixed and gold experienced a minor decline.

The Dow Jones Industrial Average (DJIA) advanced 100 points (0.4%) to 24,456, the S&P 500 Index increased 23 points (0.8%) to 2,760, and the NASDAQ Composite added 102 points (1.3%) to 7,688. In moderate volume, 658 million shares were traded on the NYSE and 1.7 billion shares changed hands on the NASDAQ. WTI crude oil increased $0.86 to $73.80 per barrel and wholesale gasoline was down $0.02 at $2.11 per gallon. Elsewhere, the Bloomberg gold spot price traded $2.73 higher to $1,255.18 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 94.04. Markets were higher for the holiday-shortened week, as the DJIA gained 0.8%, the S&P 500 Index advanced 1.5% and the NASDAQ Composite rallied 2.4%.

Nonfarm payrolls rose by 213,000 jobs month-over-month (m/m) in June, compared to the Bloomberg forecast of a 195,000 increase. The rise of 223,000 seen in May was revised to a gain of 244,000 jobs. The total upward revision to job gains for May and April was 37,000. Excluding government hiring and firing, private sector payrolls increased by 202,000, versus the forecasted gain of 190,000, after rising by 239,000 in May, revised from the 218,000 increase that was initially reported. Job growth was seen in professional and business services, manufacturing and healthcare, but job losses occurred in the retail sector.

The unemployment rate rose to 4.0% from 3.8% in May, where it was expected to remain, as the labor force participation rate unexpectedly rose. Average hourly earnings were up 0.2% m/m, below projections to match May’s unrevised 0.3% increase and y/y wage gains were 2.7%, matching May’s increase and versus estimates calling for a 2.8% rise. Finally, average weekly hours remained at May’s unrevised 34.5 rate, as expected.

The trade balance showed that the deficit shrunk more than expected to $43.1 billion in May, compared to forecasts of $43.6 billion. April’s deficit was revised lower to $46.1 billion. Exports were up 1.9% m/m at $215.3 billion, while imports increased 0.4% to $258.4 billion.

Treasuries ticked higher, with the yields on the 2-year note and the 30-year bond dipping 1 basis point to 2.54% and 2.93%, respectively, while the yield on the 10-year note was nearly unchanged at 2.82%.

Global trade concerns continue to fester as U.S. tariffs on China were implemented today, which prompted an immediate retaliation from China, while the synchronized global growth story remains a source of uncertainty in the wake of this week’s divergent global economic data. Also, global monetary policy appears poised to continue to be heading toward the tightening path, with yesterday’s minutes from the Fed’s June meeting suggesting a gradual rate hike path remains, while central banks in the Eurozone and the U.K. have signaled moves toward the path of monetary policy normalization.

Schwab Center for Financial Research – Market Analysis Group

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