Labor Report Somewhat Disappointing but Stocks Can Continue Rally

NEW YORK (TheStreet) -- Stocks are flying higher on Friday, with the S&P 500 up 1.35% at midday, following an-inline labor report for the month of April. About 235,000 jobs were added for the month, while the unemployment rate dropped to 5.4%. Regardless, the results have the index within 1% of its all-time high. 

Stocks can go up for a few more days, but Paul Richards, head of FX rates and credit distribution at UBS North America, says he was looking for a much stronger jobs report. On CNBC's "Fast Money Halftime" show, he also pointed out that March's already disappointing jobs report was revised even lower, from 126,000 to just 85,000. 

The consumer doesn't seem as strong as they should, Richards continued. While the Federal Reserve could raise interest rates in September, it seems most likely to happen in December. June is almost completely out of the question at this point, he added. 

"I've got to admit, I was a little disappointed" with the jobs report, particularly with March's revision, said Kate Moore, chief investment strategist at JP Morgan Private Bank. Like Richards, she was hoping for a jobs report north of 300,000. With that being said, the economy is improving slowly but surely, while inflation continues to increase. All three factors could allow the Fed to raise rates in the second half of 2015. 

Stocks are having a "relief rally," according to Sarat Sethi, managing director and managing partner at Douglas C. Lane & Associates. He explained that if the report was too weak, investors would feel bearish about the economy and sell stocks. However, if the report was too strong, they would also sell stocks in fear that the Fed would raise rates too soon. 

By some point next week, stocks could easily give up Friday's gains, said Jim Lebenthal, president of Lebenthal Asset Management. Regardless, the job market and wages are improving and he believes the Fed will raise rates in September. 

Lebenthal added that the March labor report was weaker-than-expected due to the slowdown in the oil industry. 

Because interest rates and bond yields are so low, it's left investors chasing assets with any sort of yield, according to Michael Block, chief strategist at Rhino Trading Partners. When investors are chasing yields at higher premiums and taking on more risk, it can be a dangerous combination, he added. 

Investors who are looking for yield, should focus on staying with short-duration bonds, Sethi added. Investors should also look for stocks that have good growth, because companies that only have a good dividend, but no earnings growth will be the first ones to be sold when interest rates are raised.

Investors should be cautious of high yield bonds, Moore added. While there's probably a bit more upside and the funds will ultimately finish in positive territory in 2015, investors shouldn't get too ahead of themselves and pay too high of a price, she said. 

Stocks are mainly doing so well because there aren't any other attractive assets to buy, Richards said. 

The conversation turned to oil, which has surged in recent weeks, rallying from sub-$45 per barrel to over $60 earlier this week. However, Sethi says that a top could be in for oil prices, at least for now. First, oil prices were too low and now they're too high. But overall, there's just too much supply to justify high oil prices. 

Lebenthal agreed, but said that he likes defensive energy stocks with low valuations and solid dividends, such as Chevron (CVX). 

While Moore says she's not looking to add to any energy positions, she does like the capital expenditure reductions and cost cutting. She also pointed out that demand from China and other emerging markets have been stronger than expected.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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