Economic data has been one of the prevailing themes this week, one that was extended Friday when the Labor Department delivered the September jobs reading. Today’s job headline was good enough to boost stocks and it was good, depending upon how one looks at the number.
The Labor Department said 114,000 private sector jobs were added in September and 136,000 overall, thanks a boost from census workers. Economists expected the addition of 145,000 jobs. Plus, the August private payroll number was revised higher to 122,000.
Importantly, average hourly earnings jumped 2.9% while the unemployment rate fell to 3.5%, the lowest reading in almost 50 years.
While there was plenty of criticism, perhaps some politically motivated, of the jobs report, there was good and bad news within the details, but markets appeared to find some comfort in the data.
No, the jobs report wasn’t perfect, but it wasn’t a total dud, either, and that was enough to send the Nasdaq Composite higher by 1.40% while the S&P 500 rose 1.42%. The Dow Jones Industrial Average advanced 1.42% as 29 of the index’s 30 components were pointed higher in late trading, one of best ratios in some time.
Important Leadership
On a day when nearly all of the Dow’s constituents were higher, it’s hard to quibble about where the leadership was sourced from, but it’s certainly a good sign to see Apple (NASDAQ:AAPL) atop today’s leader board.
As important as knowing that Apple was the Dow leader today is knowing why the stock rallied. Press reports out of Asia indicate the company is boosting production of its more affordable iPhone, a sign that demand for the lower-priced smartphone is robust.
“Apple has told suppliers to increase their production of its latest iPhone 11 range by up to 10%, or 8 million units following better-than-expected demand worldwide for its new cut-price handset,” reports Nikkei Asian Review. “Apple launched its three new iPhone models — the iPhone 11, 11 Pro, and 11 Pro Max — in early September, and for the first time in its history reduced the starting price of the model upgrade, despite better cameras, to $699, compared to $749 for last year’s iPhone XR.”
Watching Disney on the Dow
Walt Disney (NYSE:DIS) was one of more than a dozen stocks to gain 1% or more today. As has been widely noted, the company’s streaming offering, Disney +, is set to debut next month, a launch analysts and investors will be closely monitoring. But before Disney + rolls out, the California-based company reports earnings on Nov. 5 and some analysts are talking about those results.
Bank of America Merrill Lynch analyst Jessica Reif Ehrlich “expects Disney to report 88 cents in adjusted earnings per share for the fiscal fourth quarter of 2019 on $19.7 billion in revenue,” according to Barron’s.
Wall Street consensus is earnings of 99 cents a share on revenue of $19 billion. Ehrlich has a $168 price target on Disney stock, implying significant upside from Friday’s close around $130.
Fun With Financials
It was a wild week in the financial services space as the sector was slammed by news that not one, not two, but at least three major discount brokers will no longer charge commissions on equity and ETF trades. Add to that, the S&P 500’s third-largest sector weight was pressured as the aforementioned slack economic data points stirred speculation the Federal Reserve could lower interest rates this month.
Lower interest rates pressure net interest margins at financial services firms so with today’s jobs report potentially giving the Fed some leeway to postpone another rate cut, each of the Dow’s financial components rallied Friday, led by insurance giant Travelers (NYSE:TRV).
Bottom Line on Dow Jones Today
It seems probable that another rate cut is delivered before year end, but what would really light a fire for stocks is the White House ditching its protectionist policies.
“Overall, we favor reducing risk amid the ongoing protectionist push,” said BlackRock in a Friday note. “We prefer U.S. equities for their reasonable valuations and relatively high quality; and the min vol and quality factors for their defensive properties.”
Todd Shriber does not own any of the aforementioned securities.