MarketView for March 7

Summary

Share prices ended mostly higher on Friday with the S&P 500 index closing at a record high after the economy created more jobs than expected during February. And January's figure was revised upward.

The S&P 500 ended at a record closing high for the second day in a row. Friday's milestone also was the S&P 500's fifth record closing high in the past seven sessions. Nonetheless, the overall sentiment was cautious and trading was volatile throughout the session as investors adjusted their positions ahead of the weekend and kept a close eye on the simmering crisis in Ukraine.

The S&P 500 had climbed to an intraday record of 1,883.57 shortly after the opening bell, lifted by the Labor Department's report showing that employers added 175,000 jobs to their payrolls in February.

The CBOE Volatility Index fell 0.7 percent to close at 14.11. But VIX April and May futures were up at 15.83 and 16.45, respectively.

Both the Dow Jones Industrial Average and the S&P 500 indexes ended the day higher for the second straight week, with the Dow up 0.8 percent and the S&P 500 up 1 percent. The Nasdaq recorded its fifth straight weekly advance, up 0.7 percent.

Boeing fell 1 percent in extended-hours trading following news that "hairline cracks" had been discovered in the wings of 787 Dreamliner jets still in production. Boeing shares had ended the regular session at $128.54, down 0.3 percent.

Nike closed up 1.6 percent at $79.46, and Exxon Mobil was up 1.3 percent at $94.99. They were both among the top gainers of the 30 companies making up the Dow Jones Industrial Average and helped the blue-chip average outperform the broader market.

Geopolitical concerns increased when Russian President Vladimir Putin rebuffed a warning from U.S. President Barack Obama over Moscow's military intervention in Crimea, saying Russia could not ignore calls for help from Russian speakers in Ukraine.

After investors piled into gold, crude and grains on Monday as tensions escalated over Crimea, they have cautiously returned to stocks around the world. A gauge of global equities traded near a six-year high.

Shares of FireEye fell 9.5 percent to $81.04 after the network security company priced a follow-on public offering. The company sold 14 million shares of its common stock at $82 per share.

Safeway, the second-largest grocery store operator, said Thursday that private equity firm Cerberus Capital Management would acquire the company in a deal valued at about $9.4 billion. Safeway shares fell 2.2 percent to $38.60.

Skullcandy rose 24.2 percent to $9.23 after the headphone maker posted fourth-quarter earnings and provided an outlook for the first quarter and full year.

Big Lots rose 23 percent to $35.97 after the close-outs retailer reported a better-than-expected adjusted profit for the holiday quarter.

About 6.9 billion shares changed hands on the major equity exchanges, according to data from BATS Global Markets, slightly below the past month’s daily average of about 7 billion shares.

Job Growth Surprises

Job growth accelerated sharply in February despite the icy weather that gripped much of the nation, easing fears of an abrupt economic slowdown and keeping the Fed on track to continue reducing its monetary stimulus.

Employers added 175,000 jobs to their payrolls last month after creating 129,000 new positions in January, the Labor Department said on Friday. The unemployment rate, however, rose to 6.7 percent from a five-year low of 6.6 percent as Americans flooded into the labor market to search for work.

The report also showed the largest increase in average hourly earnings in eight months and the payrolls count for December and January was revised up to show 25,000 more jobs created during those months than previously reported.

Unusually cold and snowy weather has disrupted of the country’s economic activity for months, and there was some speculation that the Fed might reconsider its plan to wind down its bond-buying stimulus.

The eastern and central United States experienced record low temperatures last month, and ice and snow blanketed densely populated areas during the week employers were surveyed for February payrolls. The winter storms left Wall Street bracing for a much weaker report.

However, the weather did have an impact as it cut into the length of the average workweek, which hit its lowest level since January 2011 and led to a drop in a measure of total work effort. Yet a reversal is likely, maybe as soon as this month.

The smaller survey of households from which the unemployment rate is derived showed 6.9 million people with jobs reported they were working part-time because of the weather. That was the highest reading for February since the series started in 1978.

The survey also showed 601,000 people could not get to work because of the weather, the highest level for February since 2010. Job growth in February might have been as high as 200,000 if not for the weather. Nonetheless, payrolls averaged about 205,000 new jobs per month in the first 11 months of 2013, but that figure dropped to just 129,000 for December, January and February.

Virtually everyone at the Fed, from Chair Janet Yellen on down, subscribe to the viewpoint that the recent economic weakness is both largely weather-related and temporary. The policymakers have suggested it does not meet the high bar they have set in terms of what it would take for them to stop scaling back their bond-buying stimulus.

The Fed has already reduced its monthly bond purchases by $10 billion at each of its last two meetings, and a similar reduction is expected when officials next meet on March 18-19. However, the weather is not the only factor behind the lull in activity. Businesses are working through a huge pile of unsold goods accumulated in the second half of 2013, which means they have no incentive to place new orders with manufacturers. In addition, the expiration of long-term unemployment benefits for more than one million Americans in December and cuts to food stamps are also hurting spending.

As a result of these temporary factors, growth in the first quarter is expected to slow to an annual rate below 2 percent. The economy grew at a 2.4 percent rate in the final quarter of 2013. Economists welcomed the rise in the unemployment rate as a sign of labor market strength, since it was driven by Americans taking up the hunt for work.

A measure of underemployment that includes people who want a job but who have given up searching and those working part-time because they cannot find full-time jobs dropped to 12.6 percent, its lowest level since November 2008.

Despite the improvement, the labor market is still far from a full recovery. The percentage of working-age Americans with a job, a broad gauge of labor market health, was steady at 58.8 percent last month. It has not risen much since the recession ended nearly five years ago.

In addition, the number of Americans who have been out of work for more than six months rose in January.

Job gains last month were fairly broad-based, with private sector payrolls rising 162,000 and government adding 13,000 jobs. Manufacturing payrolls rose by 6,000 jobs, the seventh straight monthly increase.

Construction payrolls increased by 15,000 last month. Insurance employment recorded its largest gain since July, possibly boosted by implementation of President Barack Obama's signature healthcare law. Healthcare payrolls also advanced. There were, however, declines in retail, information and transportation and warehousing employment. Average hourly earnings rose nine cents.