Trade optimism, solid Chinese data send US markets higher

Saturday 2nd November 2019 09:16:24 in English News by Xafiiska Hargeysa
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    Trade optimism, solid Chinese data send US markets higher

    Trade optimism, solid Chinese data send US markets higher

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Trade optimism, solid Chinese data send US markets higher

Stocks in theUnited Statesrallied to close out the trading week on Friday as the S&P 500 set a closing record for the third time in five days after an upbeat US jobsreportand data on Chinese manufacturing eased concerns about slowing global growth.

Job growth slowed less than forecast in October, as a drag from a strike at General Motors was made up for in other areas of the labour market, while job gains in the prior two months were stronger than previously thought.

"A nice surprise, and also there were upwards revisions for September and August," said Jeff Kravetz regional investment strategist at US Bank Wealth Management in Phoenix.

"To us, that is an indication of the resiliency of the economy this late in the cycle and for today, that is what is putting investors at ease and putting them on a risk-on mode here."

The strong jobs number helped overshadow a report that showed the manufacturing sector contracted for a third straight month.

Along with the S&P's new high, the Nasdaq eclipsed its July closing record. The S&P has climbed for four straight weeks, its longest streak since February, while the Nasdaq has gained in five straight weeks as quarterly earnings have come in stronger than anticipated and US-Chinatraderhetoric has appeared to be productive. The Dow sits fewer than 12 points from a closing record.

Before the jobs report, the sentiment was supported by data showingChinamanufacturing activity unexpectedly expanded in October, easing concerns about a slowdown in demand from the world's second-largest economy as a result of US tariffs.

The Dow Jones Industrial Average rose 300.86 points, or 1.11 percent, to 27,347.09, the S&P 500 gained 29.36 points, or 0.97 percent, to 3,066.92 and the Nasdaq Composite added 94.04 points, or 1.13 percent, to 8,386.40.

For the week, the Dow rose 1.44 percent, the S&P 500 climbed 1.47 percent and the Nasdaq rose 1.74 percent.

US-China trade news remained supportive for stocks, as Beijing's state-media Xinhua News Agency reported the two countries have "reached consensus on principles." Earlier, US Secretary of Commerce Wilbur Ross said the "phase one" trade pact with China appeared to be in good shape.

About 76 percent of the 356 S&P 500 companies that have reported so far have beaten profit estimates, according to Refinitiv data.

However, profit growth forecasts for the next four quarters have been revised lower, even as expectations for a decline in third-quarter earnings have shrunk to 0.8 percent from 2.2 percent at the start of October.

Oil major Exxon Mobil Corp rose 3.00 percent after it beat recently lowered third-quarter profit expectations. The energy sector gained 2.50 percent as the best-performing S&P sector, and oil prices jumped on trade deal progress.

Qorvo Inc jumped 20.23 percent after theApplesupplier announced a $1bn share buyback plan and forecast third-quarter revenue above expectations.

But Pinterest Inc plunged 17.02 percent after the online scrapbook company missed quarterly revenue estimates.

Advancing issues outnumbered declining ones on the NYSE by a 2.81-to-1 ratio; on Nasdaq, a 2.86-to-1 ratio favoured advancers.

The S&P 500 posted 44 new 52-week highs and two new lows; the Nasdaq Composite recorded 113 new highs and 39 new lows.


Not even a strike can stop US jobs machine from trucking along

Better-than-expected employment report signals Americans are likely to keep spending, which sustains economic growth.

The October job numbers were even more impressive given the drag from a 40-day labour strike at General Motors Co's US factories, which ended last Friday [File: Brian Snyder/Reuters]
The October job numbers were even more impressive given the drag from a 40-day labour strike at General Motors Co's US factories, which ended last Friday [File: Brian Snyder/Reuters]

TheUnited Statesjobs market continues to power ahead, slowing less than expected last month, and signalling that US consumers will continue to spend, spend, spend while growing the economy.

The US Department of Laborreportedon Friday that the economy added 128,000 jobs in October - more than sufficient to absorb the estimated 100,000 new entrants into the labour force.

The headline was even more impressive given the drag from a 40-day labour strike at General Motors Co's US factories, which ended last Friday. The strike was reflected in auto manufacturing, which shed 42,000 jobs in October. But strip that number out of the equation, and total manufacturing jobs rose last month.

Employment gains for August and September were revised upward by 95,000, bringing average monthly job creation per month this year up to 167,000 - a strong number given that the US economic expansion is now in its 11th year.

The unemployment rate ticked slightly upward to 3.6 percent last month, from September's 3.5 percent rate, which was the lowest since 1969.

The closely watched monthly jobs report followed data from earlier this week showing that the US economy slowed from July through September, as uncertainty surrounding the US-Chinatrade warexacerbated a slump in business investment.

But the US economy also received a widely anticipated stimulus injection on Wednesday whenFederal Reservepolicymakerslowered borrowing costsfor the third time this year. Fed officials did, however, signal they are hitting pause on the current cycle of interest rate cuts.

"The strength of this report, together with the news earlier this week of a slightly stronger-than-expected 1.9 percent annualized gain in third-quarter GDP, would seem to support the Fed's shift to a more neutral policy stance," Capital Economics senior US economist Michael Pearce observed in a note to clients.

Though the US-China trade warcontinues to inject uncertainty into business decisions - slowing investment, disrupting supply chains and contributing to a slowdown in global growth - the US economy continues to be buoyed by healthy consumer spending.

Americans received a moderate bump in pay last month, with average hourly earnings increasing three percent in October over the previous year.

As long as Americans are working and getting pay rises, consumer spending - which accounts for roughly two-thirds of US economic activity - is likely to continue to prop up growth.

Indeed, it's solid consumer spending that offset weak business investment in the third quarter, limiting the slowdown in US economic output to 1.9 percent on an annualised basis.