With Dow above 15K, can stocks avoid a swoon?

In a volatile session Friday, investors toss aside worries about rising interest rates as the government says the economy added 195,000 jobs in June, more than expected.

By Charley Blaine Jul 5, 2013 10:09AM
Construction workers © image100/CorbisUpdated: 6:30 p.m. ET Friday 

Stocks jumped Friday after the government said payroll growth in June was much larger than expected. The national unemployment rate held steady at 7.6%.

The Dow Jones industrials ($INDU) closed above 15,000 for the first time in five sessions and finished with their biggest one-day gain in six days. Moreover, stocks  finished higher for the second week in a row, defying the predictions of many that the market is headed toward a summer swoon.

It was the kind of rally that cheers investors to look forward to the second-quarter earnings season that starts Monday with earnings from Alcoa (AA).

But interest rates and the dollar also jumped on Friday, battering precious metals prices and homebuilding stocks. That's because bond holders feared the improving jobs picture might result in the Federal Reserve moving more quickly than thought to tighten money. The U.S. dollar rose against major currencies.

One result: Mortgage rates, now at just under 4.5%, may hit 5% soon, perhaps even next week. A second result: Gold (-GC) tumbled. A third result: Earnings forecasts may disappoint, and stocks may see more volatility.

The Dow closed up 147 points to 15,136. The Standard & Poor's 500 Index ($INX) rose about 16 points to 1,632, while the Nasdaq Composite Index ($COMPX) gained 36 points to 3,479. The Dow Jones Transportation Average ($DJIT), which tends to be a leading indicator, gained 95 points to 6,290.The small-cap Russell 2000 Index closed at a record 1,005 and is up 18.3% this year.
The big gains came in a wildly volatile day where investors first saw the strong jobs report as bad news. The Dow, which had gained as many as 117 points right after the open, then lost it all, falling to a loss of as many as 17 points. But a major rebound soon erupted. The S&P 500 and Nasdaq also lost early gains before starting new rallies.

The 10-year Treasury yield climbed to 2.715% from Wednesday's 2.501%. It was the highest level since Aug. 1, 2011. 

It was a terrible day for gold, which settled down $39.20 to $1,212.70 an ounce as rate increases and a higher dollar have weighed on prices. Gold is down 27.6% this year. Silver (-SI) was off 96.4 cents to $18.74 an ounce. It fell 3.8% for the week and is off 38% in 2013.

Light, sweet crude oil (-CL), however, settled up $1.98 to $103.22 a barrel. Much of that gain is due to the volatile political situation in Egypt.

The Dow and S&P 500 finished the week up 1.5% and 1.6%, respectively. The Nasdaq gained 2.2%. For the year, the Dow is up 15.5%, with the S&P 500 14.4% and the Nasdaq up 15.2%.

The market's solid finish sets up a conflict between those who believe economic growth will improve in the second half of the year and those who see disappointing earnings keeping stocks in check.

The prospects for the earnings season aren't great. Ninety-seven S&P 500 companies have already warned that earnings will miss. Only 15 have boosted their guidance. Negatives are ahead of positives 6 to 1, the most negative sentiment since the first quarter of 2001. And that was a very rocky year for stocks, as we remember.

But technically, the Dow, S&P 500 and Nasdaq ended the week above their 50-day moving averages for the first time since June 20. The 50-day moving average is an important indicator of investor confidence.

Alcoa starts the earnings season after Monday's close; the big question will be how the aluminum giant views the global economy, especially China, as it faces higher oil, Middle East turmoil and higher interest rates.

Banking giants JPMorgan Chase (JPM) and Wells Fargo (WFC) will report on Friday. Both should say bullish things about housing and consumer spending.

Lastly, the Fed will release the minutes of its June meeting on Wednesday, and that will be scrutinized very closely for signals on when the central bank might taper its bond buying.

The Labor Department said the economy added 195,000 jobs during the month. Economists had expected a gain of 165,000 jobs. In addition, the report estimated the private sector added 202,000 jobs, also more than expected.

Further, overall nonfarm payroll gains in May and April were revised higher by a total of 70,000. The unemployment rate held at 7.6%, as many people rejoined the workforce and started to look for jobs.

Wall Street's interest in the jobs report has intensified since late May because the Fed has been talking about "tapering" its bond purchases.

It's been buying $85 billion a month in Treasury and mortgage securities to keep rates low to support the recovery. But Chairman Ben Bernanke has been saying the Fed may not need to continue purchasing securities at that rate for much longer.

While Bernanke and other officials have said the Fed won't change the target on its federal funds rate -- now 0% to 0.25% -- that talk alone has pushed longer-term interest rates higher, like the 10-year Treasury. Many economists said Friday the Fed is likely to announce the first taper at its September meeting.

With today's jobs report, the economy has added an average 191,000 jobs a month over the last 12 months. The economy has replaced nearly 75% of the 8.6 million jobs lost between the end of 2007 and the worst month for employment, in February 2010.

Job gains were strongest in sectors with low salaries, suggesting continued sluggish economic growth. We're talking retail, up 37,000, hospitality, up 75,000 and health care, up 24,000. Manufacturing declined, but motor vehicle employment was up 5,000. There were decent gains in the average work week and wage growth. And the number of long-term unemployed fell.

There were some downsides to the jobs report. The labor participation rate was at 63.5%, up slightly from May. And the broader unemployment rate, which includes people who have dropped out of the work force or can only find part-time work, was 14.3%, up from May's 13.8%.

But there are few signs, as Philippa Dunne and Doug Henwood of the Liscio Report put it, that the job market is "approaching tautness." Instead, they noted, the data "have the feel of young, part-time women workers in fast food and retail being the dynamic core of the American job market. "

European stocks fell after the report. They had rallied strongly Thursday after the European Central Bank and Bank of England said they expected to keep interest rates at very low levels to try to boost the continent's struggling economies.

But there was some concern among investors about a disappointing earnings from Korean electronics giant Samsung (SSNLF), whose fiscal-second-quarter operating profit forecast of 9.3 trillion won to 9.7 trillion won ($8.2 billion to $8.5 billion) was less than consensus estimate of 10 trillion won.

Given there were issues with the jobs report, there were also  issues with the market. Gold stocks were crushed by the decline in gold prices. Newmont Mining (NEM), the largest U.S. gold producer, was the worst S&P 500 performer, down $1.24 to $27.78.

Home builders also were battered, as investors worried rising interests would cut into the nascent housing recovery. Lennar (LEN), D.R. Horton (DHI) and PulteGroup (PHM) followed Newmont as the worst S&P 500 performers.
95Comments
Jul 5, 2013 11:26AM
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"Cheer over jobs" ???

According to the BLS seasonally adjusted numbers, full time employment actually FELL by 240,000 , while part time employment increased by 360,000.

This is a truly awful jobs report. Is this the "new math" of good economic news for this country? An increasing bunch of "indentured" part time employees slaving to serve our debt masters?

Sickening.
Jul 5, 2013 11:35AM
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There has been no Massive Tax increases for the Majority of folks in spite of what some continue to state. The Payroll tax is back to normal and is something that was foolish to begin with as Obama should have never messed with funds that go towards the Social Security Fund. Congress should never have approved such stupidity.

There has been no Massive Wage increases simply because Corporations are hoarding Record Profits and Cash on Hand only for the top executives. They are getting more and more cushy boardroom jobs, basically getting paid for doing nothing. Meanwhile workers are producing and doing more while getting paid less.

There has been no Massive Job Growth because Corporations know that the public at large doesn't have the stones to stop them from using Slave Labor overseas while forcing workers here to Do twice as much work while getting paid less. They now tell one Worker to do what once took Two workers just a decade ago. Do more, get paid far less unless you are the CEO and or their highest paid executives. The rest of us, they say we can fight over the leftover crumbs.

Jul 5, 2013 10:41AM
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IMO, this report was at the high end of the sweet spot.  I doubt it was good enough to warrant a pullback from Bernanke.  Especially when you consider the number of part-timers who want full time work jumped 322k to 8.2 million - the highest number in 8 months.  The federal reserve will talk again about tapering in Sept, but a similar market reaction to what we had last month will keep everything in place into Q4, especially if the Q2 GDP report comes out as crappy as Q1, with sub 2% growth.

Forgetting about QE for a moment, this jobs report was in line with our continued mediocrity.  We're averaging 200k jobs/month, and based on where we've been, that's just not good enough.  Here we are, in the middle of our 5th "summer of recovery", the labor participation rate remains low, the numbers of folks on food stamps and disability is still at all-time highs, and our GDP growth is still dismal.

Heard an interesting stat thrown out this morning on CNBC.  In the Great Recession, 60% of the jobs lost were decent paying, middle-class income jobs or better.  And of all the jobs created since then, 60% have been low-paying, near minimum-wage jobs.  We need a plan to seriously address this, and we need it now.

Jul 5, 2013 11:54AM
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Most of these low wage job's will go unfilled as you can make more money staying home and collecting welfare or unemployment comp. Yep, this is really gonna beef up the economy.

Jul 5, 2013 12:07PM
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Thats funny

                       the photo shows these guys standing around in hard hats.  Manufacturing lost 13k and part time restaurant and hotel is where the jobs are.  Another case of where's the pea.

Jul 5, 2013 12:17PM
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195,000 jobs added, sure, right....is absurdly dismal, and of course a lie, if it's the regime touting those numbers of course its a lie and once the welfare, I mean stimulis ends for the economy, well, can you say TIMBER!!!!!!!!! as the economy collapses with a giant thud, or if you prefer, shatters like so much Waterford crystal

 

were was the 500,000 promised per month mind you, by that decrepit senile old fool moron joe biden??? meanwhile what were those jobs imagined?, I mean 'added'??? why of course TEMP jobs, non-mortgage or car-load sustaining TEMP jobs, may as well be an after school job, its about the same thing...those jobs can't even pay for a footlong Subway sandwich!!

 

what a colossal joke upon the under employed and unemployed 'I want to work so badly' citizens, not that obama voting welfare suckin' vermin, those creatures are a lost cause, I'm talkin' bout the REAL AMERICANS that want to go back to the way it was, you know LIFE SUSTAINING JOBS THAT GO SOMEWHERE!!!

 

START THE CLOCK: its tickin' down to stimuli ENDING time, then what happens?? I'll give you 3 guesses!

Jul 5, 2013 11:28AM
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Brutus...It was in the "high end of the sweet spot" that being 175,000-195,000...

Some were projecting only about 140,000-155,000.

 

It's long been known the FED, hasn't wanted to ease off until U/E hits a near target of 6.5% U/E.

And although they are mumbling "tapering", most are still targeting 2014-2015 before Easing will be completely given up..U/E target should certainly be close or closer to 6.5% by then, IMO, I would consider that easily..or less.

Many have said and most indicators point out that the "Great Recession" is over..

Maybe the "Great" part is..And along with myself,many don't buy it that we are out of the woods yet.

Although I'm very willing to admit we have a "stagnation on a few fronts." 

And also long known is jobs would be a "lagging indicator." that could have meant 5-10 years from late 2007-2008 melt down..

Jul 5, 2013 1:07PM
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Mr. Fat Cat:   At first I thought you were just some internet troll having a few laughs, but as I’m sitting here eating my lunch and looking at your profile & past post, I’ve come to realize you need some help. (Psychological)

 

I see where in the past 4 1/2 years you’ve almost accumulated 2500 post, most of which you are either calling other people names or going on-and-on about how wealthy you are.

 

The first fact you need to come to terms with is that you are NOT wealthy!!!

 

Before you get all bent out of shape trying to come up with some witty retort to this statement, followed by your typical “Har har har or stfu” please note that there is nothing you can say to convince me otherwise.

 

I’ve seen your previous avatar pic with your car parked outside in what appeared to be some run of the mill apartment complex. Once I made mention of this to you in another posting, you then changed you avatar pic. I’m sure if I had any interest in this I could probably go online too and find that similar picture too.

 

Your previous avatar pic with your car was a very fine looking vehicle and it appeared you take great care of it….but it wasn’t a BMW or Mercedes. Looked more like a Hyundai Sonata?

 

I find this “Hey look at me, I’m rich” fantasy very disturbing. You are not rich…I’m sorry. The other thing that has me very concerned is your rage issues and your postings of violence against others members. It would appear the MSN board has since then removed your statements, so I’m not able to quote you as such.

 

I’m not here to get into an argument with you, but I am serious when I say that I think you need to talk with someone. At the very least I would highly encourage you to go off-line for a few days and just think about what I said.

 

I hope you get the help you need. Take care!

 

Jul 5, 2013 1:04PM
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i GUESS WHEN WE PUT AN aCTUAL DATE.....Of  01/20/09 of all our problems/troubles starting...

Kind of looks somewhat foolish...

And makes all or any other comments, very SUSPECT.

That points out a Ranting Reply....And "nothing more."

 

Starting in 2000 (just a starting point)

U/E was 4%, started trending up to 6% in 2003.

Dropping a little until hitting  4.6% flat in 2006-07.

Exploding to 5.8% in 2008...

Then Ballooning to 9.3% in 2009.. We all know the reasons for 2007-2009.

Hitting a high of 9.6% in 2010 and started a downtrend..

To approximately where it is at today roughly 7.5-7.6%. 

Anyone with only half a brain realizes why it climbed 2007-2010...It was a Severe Recession.

Today's rate is falling into "acceptable HISTORICAL parameters" in the downtrend...

 

I doubt for many reasons that we shall see U/E much under 5% "ever again"..

That's been talked about for sometime since 2008-2009.

Big and even smaller business(100 empls), along with Capitalist have seen a more "coniving way"

to lower the wage scales, allowed more immigrants and or illegals to gain employment..

Moved to more "business friendly" States...NOT "worker friendly."

Have gotten more Legislation passed for "right to work" States..

Which equates to "RIGHT TO WORK, FOR LESS." and less benefits..

Are quite hardcore about raising "mininium wages" until all the puzzle is in place.

AND THE BASTARDS BRAG ABOUT IT>>>>!!!!!

 

And they threaten to move the Jobs overseas, I'm sick of it and so should everybody else be too.

If the Middle Class doesn't stand up now, only half of you will be around later.

Remember when there use to be REAL AMERICANS, that hired people..

Jul 5, 2013 2:43PM
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Great, I love hearing there are more Mcdonalds jobs and temp Wal-mart openings. Sounds great....can't wait.
Jul 5, 2013 4:06PM
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NICE FINISH... the Bulls were investing in America!!!
Jul 5, 2013 5:22PM
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Things are so good that we should have ZERO trouble reducing the Food Stamp rolls back to 2009 levels, right?  We can reduce the rolls by 20 million right?

 

Delusional...   And of course we can reduce the "disabled" back to 8 million from 14 too?

 

Enjoy the democrat economy! 

Jul 5, 2013 11:51AM
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Manipulators having a ball once again this morning, brought us down from about 116 up to negative and now we are hugging the flat line....It is hard to have any confidence in the jobs report after so many bogus ones and revisions, like we've said many times, they can fool the folks out there, they don't fool the markets....Yes, the futures were up big, yes we opened way up but, for the umpteenth time, news do not more markets, people do....Lets see if this afternoon we can keep things afloat...More later.
Jul 5, 2013 2:22PM
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I'll wait for the revisions to the numbers that will come in a few weeks.
Jul 5, 2013 2:04PM
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How many people griping about low wages are the same ones cheering for the death of all unionism? There is a correlation, but many just fail to see it. Instead you cheer on the very ones that are keeping you under their thumbs. Hey, how about more tax breaks for the "job creators"   so they can create more jobs in China and Mexico?
Jul 5, 2013 2:29PM
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Those cheering for the Death of Unionism and Right to Work..Are also unknowingly cheering for the

"Death of the Middle Class."

 

Jul 5, 2013 3:47PM
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I love liberals who buy a computer.....made by a corporation...

Pay a monthly fee to an ISP.....set up by a corporation....

And use a free blog like this one....provided by a corporation....so they can b!tch about corporations.

Jul 5, 2013 2:01PM
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How were we able to have a good month on jobs?

I mean, we never passed the Democrats' 2nd stimulus bill, so.......

I thought you had to pass a bill in Washington in order to create jobs in the economy.   hahhahahahahahahahahahha
hahhahahahahahahahahaha
hahhaahhahaahahahahahahahahahahahahahah
hahahahahahahahahahahahahahahahahahahaahahahahah
Jul 5, 2013 2:11PM
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Hahahahaha. This $hit just gets funnier and funnier.

What'll it be Monday?Tune in same time, same bat$hit crazy channel.

Jul 5, 2013 9:59PM
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"That's because bond holders feared the improving jobs picture...."

That's just it. The "market" doesn't like increased employment because companies are wasting money on salaries instead of hoarding it as PROFIT.
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