US stocks rally following stellar job report

S&P 500 and Nasdaq Composite close at all-time closing highs

U.S. stocks rallied to close higher on Friday, 05 August 2016 after a stellar jobs report outstripped Wall Street expectations, showing sustained improvement in a labor market that has been spotty over the past few months. Friday's equity rally nudged the S&P 500 and Nasdaq Composite to close at all-time closing highs. The upbeat employment report elicited buying interest while diminishing on-going concerns regarding the strength of the U.S. labor market. Other factors impacting today's trade included weakness from the oil pit, continued strength in the dollar, and sector leadership from the heavily-weighted financial, technology, and consumer discretionary sectors.

The Dow Jones Industrial Average surged 191.48 points, or 1%, to finish at 18,543.53. The Nasdaq Composite Index climbed 54.87 points, or 1.1%, to close at 5,221.12. The S&P 500 finished up 18.62 points, or 0.9%, to 2,182.87.

Financials and technology stocks led the gains, up 1.9% and 1.2%, respectively, while defensive sectors such as utilities and telecoms lagged behind. Shares of Merck skyrocketed 10.4% to lead the blue-chip gauge.

For the week, the Dow industrials climbed 0.6%, the S&P 500 gained 0.4%, and the Nasdaq rallied 1.1%.

Today's economic data included the Employment Situation Report for July, the June Trade Balance, and June Consumer Credit.

The Labor Department announcedon Friday that the U.S. economy added 255,000 jobs last month, which follows a stellar gain in June, demonstrating that the economy is still healthy, despite relatively muted gross domestic product. The unemployment rate was unchanged at 4.9% even as the labor-force participation rate edged up to 62.8%, suggesting the labor market is tightening. Furthermore, average hourly earnings also came in better-than-expected, which could pave the way to an increase in inflation expectations.

The positive employment report brought forward rate hike expectations, but the fed funds futures market still does not believe that a rate hike will happen before the end of 2016. The fed funds futures market currently estimates the odds of a rate hike at the December meeting at 46.5%, rising from yesterday's implied probability of 32.1%. The dollar strengthened in response while gold fell and the economically-sensitive financial sector led today's rally.

In other economic news, the U.S. trade deficit jumped 8.7% in June to a 10-month high of $44.5 billion, reflecting the higher cost of oil and more imports of consumer goods such as cellphones and drugs.

Oil futures declined 13 cents to settle at $41.80 a barrel, while gold prices fell 1.7% to settle at $1,344.40 an ounce after the jobs report.

The U.S. Dollar Index ended off its best level of the day, but the greenback still finished with gains against the pound, yen, and euro on Friday.

Treasuries ended the day on a lower note as yield rose across the curve. The yield on the 10-yr note settled higher by eight basis points, rising to 1.59%.

Participation was in-line with the recent average as more than 842 million shares changed hands at the NYSE floor.

There is no economic data of note scheduled to be released on Monday.

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