Markets were risk-on on Wednesday after a jobs report confirmed the U.S. economic recovery is still on a fast-track.
The S&P 500 rose 0.5%, with the tech-heavy Nasdaq down up just 0.3%, signifying it was non-tech stocks and a broad rally doing the legwork for the major indices. The 10-Year Treasury yield rose to 0.67% fro 0.65%. Inflation expectations have been marginally improving.
Aiding sentiment in cyclicals was the ADP jobs report that showed 749,000 jobs added in September against economists estimates of 600,000. Even with questions lingering over whether the House’s proposed $2.2 trillion stimulus bill will be passed, consumer confidence was strong in September and businesses were adding employees, keeping the V-shaped economic and earnings recovery alive. Banks and oil stocks were up 1.4% and 0.5%, respectively.
“The pace of economic recovery is certainly key to future growth, and with private sector employment coming in better than expected this morning—the largest gain in 3 months—this could point to signs of strength in the labor market,” wrote Mike Loewengart, managing director of investment strategy at E*Trade in emailed remarks to reporters.
Semiconductors were down, with the iShares PHLX Semiconductor ETF (SOXX) – Get Report down 0.28%. Micron (MU) – Get Report, down 5% to $48 a share, beat revenue and earnings estimates handily Tuesday after the closing bell, but its $5.2 billion revenue guide and 47 cent earnings per share guide for the current quarter missed expectations. Huawei, about 10% of revenue, is not currently a customer.
Still, the weak enterprise spend the near-term management noted is holding back semiconductor stocks. Wednesday was also a risk-off day for growth stocks, which many semiconductor stocks are.