Dipo Olowookere
By Investors Hub
The major U.S. index futures are currently pointing to a higher opening on Monday, suggesting stocks will see further upside following the rally last Friday.
The markets may benefit from optimism about a U.S.-China trade agreement, with Commerce Secretary Wilbur Ross expressing optimism phase one of a trade deal could be signed this month.
?We?re in good shape, we?re making good progress, and there?s no natural reason why it couldn?t be,? Ross said in an interview with Bloomberg on Sunday.
Ross called the phase one agreement ?particularly complicated? and acknowledged it is ?always possible? the signing of the deal could ?slip a little bit.?
In the interview, Ross also said licenses for U.S. firms to sell components to China?s Huawei Technologies would be coming ?very shortly.?
President Donald Trump has also continued to express optimism about a trade deal, recently suggesting phase one of an agreement could be signed somewhere in the U.S. as soon as this month.
Stocks moved sharply higher over the course of the trading session on Friday as traders reacted to much better than expected U.S. jobs data. With the strong upward moves, the Nasdaq and the S&P 500 reached new record closing highs.
The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow surged up 301.13 points or 1.1 percent to 27,347.36, the Nasdaq soared 94.04 points or 1.1 percent to 8,386.40 and the S&P 500 jumped 29.35 points or 1 percent to 3,066.91.
For the week, the Dow shot up by 1.4 percent, while the Nasdaq and the S&P 500 skyrocketed by 1.7 percent and 1.5 percent, respectively.
The rally on Wall Street came as the much stronger than expected U.S. jobs data washed away concerns about the economic outlook.
The Labor Department said non-farm payroll employment climbed by 128,000 jobs in October compared to economist estimates for an increase of about 89,000 jobs.
The report also showed substantial upward revisions to job growth in September and August, with revised data showing employment jumped by 180,000 jobs and 219,000 jobs, respectively.
With the upward revisions, employment gains in September and August combined were 95,000 more than previously reported.
“The upshot is that the three-month average gain is now 175,000, which is easily enough to outpace population growth,” said Michael Pearce, Senior U.S. Economist at Capital Economics.
He added, “That is in stark contrast with much of the recent survey evidence, which had pointed to a sharp slowdown in employment growth.”
Despite the stronger than expected job growth, the report said the unemployment rate inched up to 3.6 percent in October from 3.5 percent in September. The uptick matched economist estimates.
The unemployment rate crept up from the nearly 50-year low hit in the previous month as a 325-person jump in the size of the labor force more than offset a 241,000-person increase in the household survey measure of employment.
Renewed optimism about a U.S.-China trade deal added to the positive sentiment, as a report from China’s Xinhua News Agency said negotiators have “reached consensus on principles.”
Meanwhile, traders largely shrugged off a separate report from the Institute for Supply Management showing a continued contraction in U.S. manufacturing activity in the month of October.
The ISM said its purchasing managers index crept up 48.3 in October from 47.8 in September, although a reading below 50 still indicates a contraction in manufacturing activity. Economists had expected the index to rise to 48.9.
In the previous month, the index fell to its lowest level since hitting 46.3 in June of 2009, the last month of the Great Recession.
“Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic,” said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Global trade remains the most significant cross-industry issue.”
Energy stocks turned in some of the market’s best performances on the day, benefiting for a sharp increase by the price of crude oil.
Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 5.4 percent, the NYSE Arca Natural Gas Index surged up by 3 percent and the NYSE Arca Oil Index jumped by 2.3 percent.
Substantial strength was also visible among steel stocks, as reflected by the 4.3 percent spike by the NYSE Arca Steel Index. The index ended the session at its best closing level in well over a month.
U.S. Steel (X) helped lead the sector higher after reporting a narrower than expected third quarter loss on revenues that exceeded analyst estimates.
Biotechnology, transportation and financial stocks also saw significant strength on the day, while gold, networking and telecom stocks bucked the uptrend.
