Betting a Big Hike's Priced In, Traders Get Indices Leaping
Investors jumped into the market to grab up stocks this morning after sitting nervously on their pocketbooks all week waiting for today's jobs data, and all major indices have been climbing steadily northward since then.
Wall Street panicked briefly when the numbers first rolled in at 8:30 a.m. EDT, and stock futures dipped into the red, but they quickly recovered, bounding back into positive territory right before the open.
It's not like the jobs numbers were really that nice. But following a downpour of hot data since last week, the market was already expecting the
Federal Open Market Committee to hike interest rates by an aggressive 50 basis points May 16. In fact, most say a 50-point hike is priced into the
fed funds futures contract. And today's numbers weren't ugly enough to convince investors that even more aggressive tightening would be happening this year.
"The numbers have a bearish tone to them, but they weren't an aberration by any stretch," said Brian Conroy, head of listed trading at
J.P. Morgan
.
The April unemployment figure hit a 30-year low of 3.9%, just under
Reuters
consensus poll estimates of 4.0%, while average hourly earnings came out in-line with estimates of 0.4% and nonfarm payrolls were up 340,000, just under
Reuters
estimates of 358,000.
There are others who still wonder if a 50-basis point hike is really in the cards. The FOMC hasn't raised rates by more than 25 basis points in five years and has tended to like a gradualist approach.
"I think the market has to process more information, price in April
retail sales data, inflation statistics," said William Sullivan, chief money-market economist at
Morgan Stanley Dean Witter
.
"If the
Fed does go ahead and raise rates 50 basis points, it will want to see the lag on that decision processed," said Sullivan. "If they do raise rates by this much, more monetary correction measures could be on hold for an extensive period, maybe through the rest of the year."
Around midday, the biotech, semiconductor, computer boxmaker and telecom sectors were all taking the
Nasdaq Composite Index
higher.
At midday, the
Nasdaq Biotechnology Index
was up 2.8%, the
Philadelphia Stock Exchange Computer Box Maker Index
was up 2.3% and the
Nasdaq Telecommunications Index
was better by 1.1%.
Semiconductor stocks were trading higher after
Merrill Lynch's
(MER)
new
Semiconductor HOLDRs
(SMH) - Get Report
started trading today on the
American Stock Exchange
. This
basket of 20 chip stocks can be bought and sold just like a stock and includes all this big semiconductor names like
Texas Instruments
(TXN) - Get Report
,
Intel
(INTC) - Get Report
and
Applied Materials
(AMAT) - Get Report
. Other HOLDRs track sectors like the
Internet
(HHH)
and
Biotech
(BHH)
.
The
Philadephia Stock Exchange Semiconductor Index
was up 1.5%.
Tobacco, utilities and gold stocks were giving back some of yesterday's gains, with the
American Stock Exchange Tobacco Index
down 0.4%, the
Dow Jones Utilities Average
off 1.2% and the
Philadelphia Stock Exchange Gold and Silver Index
down 4.5%.
The Nasdaq was getting extra bounce from
Brocade Communications
(BRCD)
, up 10%, and
Bookham Technology
(BKHM)
, up 19.4%.
Strongest on the
New York Stock Exchange today were
STMicroelectronics
(STM) - Get Report
, up 9.2%, and, once again,
Three-Five Systems
(TFS)
, up 10.9%.
TheStreet.com Internet Sector
index was narrowly in the green, up 4 to 893.
Market Internals
Breadth was positive and volume was decent on both the NYSE and the Nasdaq.
New York Stock Exchange:
1,466 advancers, 1,273 decliners, 497 million shares. 58 new 52-week highs, 39 new lows.
Nasdaq Stock Market:
2,083 advancers, 1,617 decliners, 724 million shares. 24 new highs, 42 new lows.
For a look at stocks in the midsession news, see Midday Stocks to Watch, published separately.
Senior writer
Dagen McDowell contributed to this story.
