U.S. stocks finished Friday’s trading session higher in the wake of some softer-than-expected services sector reads and a July labor report that missed on job growth expectations, but had a strong upward revision to the prior month. Technology issues paused from a recent recovery, keeping the Nasdaq mostly flat. Kraft-Heinz reported stronger-than-forecasted earnings results and shares of Symantec fell following its earnings report. Treasury yields and crude oil prices were lower, gold ticked to the upside and the U.S. dollar was nearly unchanged.

The Dow Jones Industrial Average (DJIA) advanced 136 points (0.5%) to 25,463, the S&P 500 Index increased 13 points (0.5%) to 2,840, and the NASDAQ Composite ticked 9 points (0.1%) higher to 7,812. In moderate volume, 705 million shares were traded on the NYSE and 2.0 billion shares changed hands on the NASDAQ. WTI crude oil dipped $0.47 to $68.49 per barrel and wholesale gasoline shed $0.01 to $2.06 per gallon. Elsewhere, the Bloomberg gold spot price gained $5.90 to $1,213.73 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 95.17. Markets were mostly higher for the week, as the DJIA ticked 0.1% higher, the S&P 500 Index gained 0.8%, and the NASDAQ Composite increased 1.0%.

Nonfarm payrolls rose by 157,000 jobs month-over-month (m/m) in July, compared to the Bloomberg forecast of a 193,000 increase. However, the rise of 213,000 seen in June was revised to a gain of 248,000 jobs. The total upward revision to job gains for June and May was 59,000. Excluding government hiring and firing, private sector payrolls increased by 170,000, versus the forecasted gain of 190,000, after rising by 234,000 in June, revised from the 202,000 increase that was initially reported. Job gains were seen in professional and business services, manufacturing, and in health care and social assistance. The softer-than-expected July increase in employment may have resulted from a drop in job gains from the sporting goods, hobby, book, and music stores, which likely were tied to the impact of the closing of Toys “R” Us stores.

The unemployment rate dipped to 3.9% from 4.0%, matching estimates, while average hourly earnings were up 0.3% m/m, also in line with projections, but June’s 0.2% increase was revised to a 0.1% increase. Y/Y, wage gains were 2.7% higher, in line with estimates for it to match June’s increase. Finally, average weekly hours dipped to 34.5 hours, from June’s upwardly revised 34.6 rate.

The July Institute for Supply Management (ISM) non-Manufacturing Index fell to 55.7, from June’s 59.1 level, and versus the Bloomberg forecast of a dip to 58.6. A reading above 50 denotes expansion. New orders and business activity both fell solidly, but still remained comfortably in expansion territory, though employment growth accelerated further into expansion territory. Prices were up 2.7 points to 63.4. Non-manufacturing activity accounts for a large majority of U.S. economic output and the ISM said the majority of respondents remain positive about business conditions and the economy, but tariffs and deliveries are an ongoing concern.

Treasuries were higher following the employment and services sector data, with the yield on the 2-year note declining 2 basis points (bps) to 2.65% and the yields on the 10-year note and the 30-year bond decreasing 3 bps to 2.95% and 3.09%, respectively. The U.S. dollar was mostly flat.

Friday’s softer-than-expected dose of services and employment data did not appear to change the outlook for the Fed’s rate hike campaign, with the job growth miss countered by the prior month’s solid revision and as wage growth remained subdued, while the services sector resides in expansion territory. Wednesday, the Fed expectedly kept its monetary policy stance unchanged but upgraded its economic outlook, keeping September rate hike expectations healthy and a December increase in play.

Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

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