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Daily Market Recap

Fri, Dec 6, 2013 - 3:09pm

The S&P 500 gained 1.12% and the Dow was higher by 1.26%. Stocks traded higher from the open today.

The November employment report was better than expected and showed continued positive trends in employment and earnings. Nonfarm payrolls increased by 203,000 against a consensus estimate of 188,000. The number for September was revised higher to 175,000 from 163,000. The unemployment rate decreased from 7.3% to 7.0%. More people found jobs, the gains were across several industry groups.

The university of Michigan consumer sentiment index jumped up 7.4 points to 82.5, bringing the index to its highest level since July. The "current conditions" and the "expectations" measures each showed strong gains. Sentiment about government economic policy also improved.

Homebuilders, banks, materials, and technology outperformed today while utilities, retail, telecom, and media lagged. Banks are reacting favorably to the news as strong economic data further point to the tapering process beginning in the first quarter of next year. Banks will benefit from a steepening of the yield curve. Telecom and utilities are underperforming as some higher yielding names are seeing selling as investors move to more cyclical areas of the market.

Financials reacted favorably to the macro economic data. Money center banks were strong but regional banks were the strength of the group. Regionals have a high correlation with the yield curve. Rising long term interest rates point to higher profit margins for the regionals. Asset managers and insurance companies were strong across the board.

Industrials had their first positive day of the week. The strength was broad based. Illinois Tool Works broke out of a trading range. Buyers came into ITW after they completed a meeting with analysts. Parker Hannifin moved out to new highs after Goldman Sachs upped their rating on the stock. Multi-line industrials were strong as investors used the recent pullback to increase exposure to cyclical names.

PC related stocks stood out in the technology sector today. Intel was upgraded by two firms on better than expected data on PC sales. Hewlett Packard, Micron, and Western Digital all had strong days also. Semiconductors did well. Broadcom rose on positive orders numbers. Equipment stocks rallied after one company talked down orders yesterday. After its great run recently Apple did not participate in the rally today.

The consumer space was decidedly mixed today. There were several sharp declines on retailers missing earnings estimates. The restaurant space was an area of strength. Casual dining names were strong. In consumer staples beverages and packaged goods were areas of strength.

Source: PFS Group

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