Despite a rocky start to the day, U.S. equity markets managed to make a late session surge to finish Friday in positive territory. The Dow rose by 20 points while the S&P 500 and the Nasdaq gained 0.3% and 0.5%, respectively. Commodities also had another solid day as softs once again led the way but were closely trailed by 1.5% moves in the gold and oil markets. These jumps were largely fueled by weakness in the U.S. dollar, which sank by 1.4% on the day on the back of losses against both the yen and the euro, as well as a 1.6% loss against the Australian dollar.
Today’s market-moving events consisted of some key data points early in the morning as unemployment and factory orders both disappointed traders. Total nonfarm payrolls increased by just 39,000 in November, a far cry from the economist consensus gain of 155,000. This slim gain in jobs combined with other factors to push up the unemployment rate to 9.8%, the highest level since April. Meanwhile, factory orders slumped by 0.9% in November, the first decline in four months, and came in below the economist expectation of a 0.7% decline. These two factors helped to lower confidence in the American economic recovery, but a weak dollar and Wall Street skepticism over the jobs numbers helped to boost markets to close out the week. “The jobs number was surprising, and I’m wondering if next month we get a revision. I mean retail losses in November? The market is going to react to it, but you do have to take it with a grain of salt,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald, of the Labor Department’s report.
One of the biggest ETF gainers on the day was the Market Vectors Gold Miners ETF (GDX), which rose by 2.6% on the day. These gains were fueled by a solid performance out of the yellow metal in Friday trading which saw the commodity once again cross the $1,400/oz. mark. Traders also bought up the miners of the metal as a hedge against further weakness in the American economic environment going forward, while others believed that the recent weakness in the employment report will force the Fed to keep its easing policies in place longer than initially expected, potentially sinking the dollar and boosting demand for alternative currencies such as gold. “The rise in unemployment and the lower jobs number were all against expectations, it suggests to the market participants that the Fed policy is going to remain easier for longer,” said Jeffrey Nichols, managing director of consultancy American Precious Metals Advisors [see holdings of GDX here].
One of the biggest losers in the ETFdb 60 was the iShares FTSE/Xinhua China 25 Index Fund (FXI), which fell by 1.4% on the day. These losses came after the world’s most populous country announced that it will adopt a “prudent” stance in its management of liquidity in 2011, signaling to many that the country will continue tightening in order to curtail inflation and prevent the white-hot economy from overheating.“’Prudent’ has been the word of choice by Chinese officials for a month or so now when describing the desired stance of monetary policy but its use in today’s statement by the Politburo is a more authoritative signal of a shift,” RBC analyst Brian Jackson said in a note on Friday. “We also expect rate hikes to be accompanied by currency appreciation.” While this news is likely to help curb its 4.4% inflation rate, it will also probably make it more difficult for banks to lend and consumers to borrow, a fact that helped to limit demand for FXI in Friday’s session [see fundamentals of FXI here].
Disclosure: No positions at time of writing.