Dow opens at record high after strong July jobs data

US stocks opened higher on Friday (Aug 4), after data points to signs of a tight labour market.
US stocks opened higher on Friday (Aug 4), after data points to signs of a tight labour market. PHOTO: AFP

NEW YORK (REUTERS) - US stocks opened higher on Friday (Aug 4), with the Dow hitting a record high, after data showed US employers hired more workers than expected in July, signalling labour market tightness.

The Labor Department report showed that non-farm payrolls increased by 209,000 jobs last month, above the 183,000 rise expected by economists polled by Reuters. June's employment gain was revised up to 231,000 from the previously reported 222,000.

Average hourly earnings rose 0.3 per cent after gaining 0.2 per cent in June, while the unemployment rate fell to 4.3 per cent. The strong jobs report is likely to clear the way for the Federal Reserve to announce a plan to start shrinking its US$4.5 trillion (S$6.1 trillion) bond portfolio in September, and could strengthen its case to raise rates for the third time this year in December.

Chances of a rate hike by the end of the year increased to 50 per cent from 46 per cent after the release of the data, according to CME Group's FedWatch tool.

"Not only did the July number beat, there was a net revision higher of previous months. Wages seem stuck growing at 2.5 per cent year over year, but at least they're not wavering," said Brian Jacobsen, senior investment strategist at Wells Fargo Funds Management. "Combine this decent employment report with a weaker dollar and the Fed has no reason to deviate from its plan to shrink its balance sheet and hike one more time this year."

 

At 9.36am ET (9.36pm Singapore time), the Dow Jones Industrial Average was up 36.01 points, or 0.16 per cent, at 22,062.11 and the S&P 500 was up 4.55 points, or 0.18 per cent, at 2,476.71. The Nasdaq Composite was up 6.61 points, or 0.1 per cent, at 6,346.95.

Ten of the 11 major S&P sectors were higher, with the financial index's 0.65 per cent rise leading the advancers. The S&P 500 has risen 11 per cent in 2017 despite doubts over President Donald Trump's ability to fulfil his promises of cutting taxes and increasing infrastructure spending.

A strong earnings season has helped allay concerns about stretched valuation, with the S&P 500 trading at a pricey 18 times expected earnings, compared with its 10-year average of 14. Analysts expect earnings of S&P 500 companies to have risen 11.8 per cent, while projecting a 9.2 per cent rise in earnings for the September quarter, according to Thomson Reuters I/B/E/S.

Advancing issues outnumbered decliners on the NYSE by 1,619 to 797. On the Nasdaq, 1,269 issues rose and 907 fell.