Stocks rally after jobs report easily tops estimates

Stocks rose Wednesday as traders parsed solid employment data ahead of the release of Federal Reserve minutes.

The Dow was up 140 points, with UnitedHealth and Caterpillar contributing the most gains.

The S&P 500 gained 0.55 percent, with industrials and energy outperforming. Energy stocks gave back some gains after the Energy Information Administration said U.S. crude inventories rose by 1.6 million barrels.

The Nasdaq advanced 0.45 percent.

Private payrolls rose by 263,000 last month, well above a consensus estimate of 185,000. The February number was revised significantly lower, however, from the originally reported 298,000.

“The ADP report really seemed to contradict some of the negative bias in the market,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank. He noted some market participants were worried that last month’s weather could have had an adverse impact on hiring.

The report serves as a preamble for the Bureau of Labor Statistics’ monthly employment report, which will be released Friday at 8:30 a.m. ET.

“We’re probably going to get a much better-than-expected nonfarm payrolls report on Friday,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. The U.S. economy is expected to have added around 180,000 jobs in March, according to a Reuters estimate.

Other data released Wednesday included the Institute for Supply Management’s nonmanufacturing index, which came in at 55.2, below an expected read if 57.

The Fed is also scheduled to release the minutes from its March meeting at 2 p.m. ET. The central bank raised rates by 25 basis points but kept its 2017 outlook largely unchanged.

“The Fed is data dependent and we know that. However, the question is how much attention they are paying to some of those elements which are cooking under the lid,” said Naeem Aslam, chief market strategist at FXTM.

Treasurys fell on Wednesday, with the benchmark 10-year note yield holding near 2.37 percent while the two-year note yield held around 1.26 percent. Yields move inversely to prices.

The dollar rose 0.09 percent against a basket of major currencies, with the euro near $1.066 and the yen around 111.2.

Overseas, European equities traded mostly higher while Asian equities also rose as investors turned their eyes to President Donald Trump’s meeting with Chinese President Xi Jinping.

Schwab’s Frederick said the two-day meeting in Mar-a-Lago will be “the wildcard” this week. He said he expects the meeting to go well, noting Trump has been cordial with other world leaders that have visited the country recently.

“It would surprise me very much if he acts though in person [with Xi]. He doesn’t seem like he does that,” Frederick said.

Fred Imbert

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