US close: Stocks jump after July jobs figure, strategists sound optimistic note

A better-than-expected US jobs report for July pushed the Nasdaq Composite to its first record close in a year at the end of the week, alongside fresh highs for the S&P - with financials and transport stocks spearheading the rise.

The Dow Jones Industrial Average rose 1.04% or 191.48 points to 18,543.53, the S&P 500 gained 0.86% or 18.62 points to 2,182.87 and the Nasdaq Composite moved up 1.06% or 54.87 points to finish at 5,221.12.

In contrast, oil prices retreated with West Texas Intermediate crude oil futures drifting four cents lower to $41.80 per barrel.

Among the major market groups, the largest gains were to be seen among: Life insurers (3.35%), Airlines (3.29%), Transport services (3.08%), Banks (2.99%) and Marine transport (2.93%).

Non-farm payrolls trounce forecasts

US employers added 255,000 jobs in July, smashing forecasts for a gain of 180,000, the Labor Department’s non-farm payrolls report revealed. It followed an upwardly revised 292,000 increase in June.

The unemployment rate was unchanged at 4.9% in July, compared to estimates of 4.8%. Average hourly earnings rose 0.3% on the month, beating estimates for a 0.2% increase and following a 0.1% rise in June. On the year, hourly earnings growth in July was unchanged at 2.6%, as expected.

“The steady job market improvement and keeps alive the possibility of the Fed hiking rates again this year, but worries about sluggish economic growth and deteriorating productivity, as well as uncertainty created by the presidential election, suggests that any tightening of policy will be delayed until December,” said Chris Williamson, chief business economist at IHS Markit.

“The problem facing the Fed is that the ongoing robust rate of job creation is taking place against a backdrop of weak output growth, suggesting productivity and profit margins are likely to be suffering.”

By the close of trading on 5 August, the CME FedWatch tool was indicating a 15% chance of an interest rate rise in September, a 15% chance in November and 43.7% in December.

Strategists upbeat

Credit Suisse´s Andrew Garthwaite bumped up his end-2016 target for the S&P 500 to 2,250 points, explaining, amongt other things, that the equity risk premium ought to be at 5.0% instead of 5.8%.

"[...] Many US lead indicators of IP, capex and employment are now turning higher. In addition, we have had the longest period of inventory decline since the 1950s. 3) There appear to be clear hints of fiscal easing from policy makers in the US, UK and Japan," he also added.

His peers at Citi were also to be seen out and about, telling clients in a research report that US equities were "cheap" in terms of their free cash flow yield.

Analysts up quarterly earnings estimates

On the corporate front, Zynga shares dropped after the videogame developer released a weak outlook on third quarter revenues.

FireEye slumped after the security software company reported quarterly sales that missed its own forecast and announced plans to cut 300 to 400 jobs.

Liberty Media Corp. edged higher as it reported strong quarterly results.

GoDaddy continued to rise after reporting a narrower loss for the second quarter on Wednesday.

With roughly three-quarters of its components having already reported their quarterly financials, approximately 77% of S&P 500 firms had beaten profit projections and 56% exceeded sales forecasts, according to Bloomberg data.

Analysts had also tempered their estimates for a decline in second-quarter net income to 2.7%, from 5.8% less than a month ago, Bloomberg reported.

Ten-year US Treasury note yields jumped nine basis points to 1.59% while those on the two-year note advanced by eight basis points to 0.722%.

Dow Jones - Risers

Merck & Co. Inc. (MRK) $63.86 10.41%
JP Morgan Chase & Co. (JPM) $66.30 2.70%
Goldman Sachs Group Inc. (GS) $162.09 2.56%
American Express Co. (AXP) $65.52 2.47%
Nike Inc. (NKE) $55.85 1.93%
Apple Inc. (AAPL) $107.48 1.52%
United Technologies Corp. (UTX) $107.74 1.30%
International Business Machines Corp. (IBM) $163.50 1.21%
Intel Corp. (INTC) $34.98 1.16%
Microsoft Corp. (MSFT) $57.96 0.99%

Dow Jones - Fallers

Verizon Communications Inc. (VZ) $53.64 -0.54%
Procter & Gamble Co. (PG) $85.78 -0.31%
Coca-Cola Co. (KO) $43.48 -0.07%
Exxon Mobil Corp. (XOM) $87.56 0.09%
Chevron Corp. (CVX) $100.51 0.12%
Unitedhealth Group Inc. (UNH) $142.99 0.20%
Johnson & Johnson (JNJ) $124.24 0.31%
General Electric Co. (GE) $31.28 0.35%
Boeing Co. (BA) $131.73 0.40%
3M Co. (MMM) $178.57 0.43%

S&P 500 - Risers

Merck & Co. Inc. (MRK) $63.86 10.41%
Eog Resources Inc. (EOG) $90.16 7.03%
Quanta Services Inc. (PWR) $24.85 5.97%
Lincoln National Corp. (LNC) $45.51 5.84%
United Continental Holdings Inc. (UAL) $48.41 5.47%
Charles Schwab Corp. (SCHW) $29.93 5.05%
Motorola Solutions Inc (MSI) $73.50 4.64%
Keycorp (KEY) $12.26 4.52%
Prudential Fincl Inc. (PRU) $76.03 4.38%
Citigroup Inc. (C) $45.72 4.29%

S&P 500 - Fallers

Bristol-Myers Squibb (BMY) $63.28 -15.99%
Chesapeake Energy Corp. (CHK) $4.89 -4.68%
TripAdvisor Inc. (TRIP) $60.81 -4.37%
Centerpoint Energy Inc. (CNP) $22.67 -3.94%
Willis Towers Watson Public Limited Company (WLTW) $119.92 -3.36%
Sempra Energy (SRE) $107.04 -2.95%
Dentsply International Inc. (XRAY) $61.99 -2.67%
Southwestern Energy Co. (SWN) $13.97 -2.51%
Regeneron Pharmaceuticals Inc. (REGN) $423.00 -2.40%
Amer Water Works (AWK) $78.48 -2.08%