BLS Buzzkill Fails To Stop Stock Market Advance

The sun used to rise and set on the stock market, depending on the results of the monthly non-farm payrolls report from the Department of Labor’s Bureau of Labor Statistics. On Friday, it made absolutely no difference. Despite the huge shortfall, with only 162,000 new non-farm payroll jobs added in July – missing expectations of 185,000 – the Dow Jones Industrial Average and the S&P 500 Index finished the session at new record-high closing levels. Surprisingly, the Russell 2000 Index – which hits record highs with the regularity of a geriatric on Metamucil, prunes and yogurt – missed a new record close by a gap too small to accommodate a nanoparticle.

The payrolls disappointment cloud had a silver lining because most investors believed it would discourage the Fed from being too quick with the taper trigger. Bad news for employment is good news for the longevity of the quantitative easing program. On the other hand, the drop in the labor participation rate from 63.5 percent to 63.4 percent helped to push the unemployment rate down from 7.6 percent last month to 7.4 percent. Keep in mind that Ben Bernanke has been discussing a 7 percent unemployment rate as a threshold for beginning the taper.

The Dow Jones Industrial Average (DIA) picked up 30 points to finish Friday’s trading session at another record-high close of 15,658.36 for a 0.19 percent advance. The Dow retreated 32 basis points from a new intraday record high of 15,658.68. The S&P 500 (SPY) rose 0.16 percent to finish the week at a record high of 1,709.67.

The Nasdaq 100 (QQQ) climbed 0.55 percent to finish at 3,143. The Russell 2000 (IWM) actually retreated by less than one basis point from Thursday’s record-high close of 1,059.88 to end the week at 1.059.86. Wow!

In other major markets, oil (USO) declined 0.86 percent to close at $37.94.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil declined by 60 cents (0.55 percent) to $108.94/bbl. (BNO).

August Gold Futures advanced by $1.10 (0.08 percent) to $1,312.10 per ounce (GLD).

Transports ran out of gas on Friday, with the Dow Jones Transportation Average (IYT) declining 0.22 percent.

In Japan, stocks skyrocketed as the yen weakened to 99.67 per dollar during Friday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average skyrocketed 3.29 percent to 14,466 (EWJ).

In China, stocks advanced modestly as a result of continuing reports that the government plans to ease restrictions on real estate transactions. The Shanghai Composite Index inched upward by 0.02 percent to close at 2,029 (FXI). Hong Kong’s Hang Seng Index advanced 0.46 percent to finish the session at 22,190 (EWH).

Friday was one of those unusual days when American economic data really did impact the major European stock indices. A review of the charts validates claims that European stocks made a retreat after America’s disappointing non-farm payrolls report for July. The Euro STOXX 50 Index had been bouncing between 2,812 and 2,819 until just after the report was released at 8:30 EDT. At that point, the STOXX 50 sank to 2,796. However, as was the case with the American stock indices, the STOXX 50 managed to climb out of the red before the closing bell.

The Euro STOXX 50 Index finished Friday’s session with a 0.08 percent advance to 2,811 – climbing further above its 50-day moving average of 2,690. Its Relative Strength Index is 69.50 (FEZ). Most investors consider an RSI above 70 as an “overbought” signal.

Technical indicators reveal that the S&P 500 continued to soar above its 50-day moving average of 1,647 after finishing Friday’s session with a 0.16 percent advance to its latest record high of 1,709.67. At this point, bears are hoping to see the formation of a head-and-shoulders pattern on the S&P chart. Its Relative Strength Index rose from 69.25 to 70.10. With the S&P now above the “overbought” threshold of 70, many investors could take that as a “sell” signal, resulting in a pullback. After dipping below the signal line on Wednesday, the MACD has climbed back above it, suggesting a continued advance.

For Friday, only three sectors were in negative territory. The consumer discretionary sector led the group, with a 0.71 percent surge. The energy sector trailed the group with a 0.44 percent decline.

Consumer Discretionary (XLY): +0.71%

Technology: (XLK): +0.44%

Industrials (XLI): +0.20%

Materials: (XLB): +0.56%

Energy (XLE): -0.44%

Financials: (XLF): -0.02%

Utilities (XLU): -0.13%

Health Care: (XLV): +0.04%

Consumer Staples (XLP): +0.05%

Bottom line: The disappointing report on July non-farm payrolls failed to stop the Dow and the S&P 500 from hitting new record highs as investors expected the report to motivate the Federal Reserve to delay the tapering of its bond-buying program.

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