Stocks climb to session highs

It’s a strong finish to a volatile week, with US index benchmarks rising more than 1% on the day.

The rally has picked up speed as the day has worn on, with the S&P 500 up 1.2% heading into the final hour of trading on Wall Street, trading near the high of the day.

This is a very encouraging sign for sentiment, given how weak the employment data was earlier. Some commentators are downplaying the data, saying weather was partly to blame and it wasn’t all that bad, but I’d disagree. Whichever way you slice it, it was a very weak report.

When no analyst was predicting payroll growth as low as 113,000 and the median estimate was about 60% higher, you have to say it was woeful. The recovery in US employment was going just fine up to November, but with two very soft months in a row, there has to be some concern about whether we are seeing a change in the trend. December’s weakness looks even starker now, given a sizeable upward revision to November and a meagre revision to December.

Private payroll growth of 142,000 in January also hugely undershot expectations. Yes, there was bad weather in December and January, but isn’t that always the case at this time of year?

I think today’s rally may be more to do with the quality of earnings than anything else.

We’re deep enough into earnings season to be able to make with reasonable confidence some calls as to the overall character of how US companies performed last quarter. Basically, it’s good news, with earnings on course for growth of 9% or so and three quarters of the companies in the S&P that have reported so far beating expectations with their earnings. The top line isn’t as strong, which has been a familiar refrain for several quarters, but if companies are able to keep growing earnings at these rates they become attractive at current valuations.

Looking ahead to next week, the first look at consumer sentiment for February (released next Friday) is one of the more interesting events in the calendar, alongside Janet Yellen’s first monetary policy testimony before House Financial Services Committee in Washington (next Tuesday).

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.