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US Stocks Continue to Power Higher on Positive Payrolls Data


Today's financial recap and tomorrow's financial outlook.

US markets continued to trend strongly higher on the holiday-shortened session helped by better-than-expected payroll growth from June. Industrials and consumer discretionary stocks performed very strongly. Rate-sensitive areas such as REIT's, utilities, and telco servicers all fared poorly due to rising Treasury rates. Short-term Treasuries fared the worst as market participants began to price in a faster pace of rate increases. Similarly, bank stocks outperformed because rising intermediate and short-term rates benefit their net interest income so long as its funding rates remain near zero.

US equity trading closed early at 1:00 p.m. EDT and bond trading at 2:00 p.m.

The ECB left rates on hold as expected by every economist. In a post-meeting press release it announced further details for its longer-term financing operations and asset-backed securities purchases. The EURUSD fell, but more likely due to a higher dollar (which was responding to rising Treasury yields), and not because participants were selling the euro.

Nonfarm payrolls rose by 288,000 in June, echoing a similar 281K private payroll growth seen in yesterday's ADP report. The consensus economist estimate was 215K, but that figure had been revised up from 205K on Tuesday. The unemployment rate fell to 6.1%, better than the 6.3% expected, due to a substantial drop in household unemployment.

Shares of pet retailer PetSmart (NASDAQ:PETM) rose 12.53% to $67.30 after activist investment firm Jana Partners announced it took a 9.9% stake in the company. In its 13-D filing with the SEC, Jana made demands for operating improvements and returns of capital to PetSmart shareholders.

Tomorrow's Financial Outlook

US markets will be closed tomorrow for the Fourth of July holiday. There are no reports scheduled for Monday.

Other global markets will be open, however, although trading should be muted in Europe with most US firms taking the day off. German factory orders for May is the only notable economic report scheduled for tomorrow.

Twitter: @Minyanville

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No positions in stocks mentioned.

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