Stocks gain traction as Yellen plays down weak jobs report

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Boeing is top gainer on the Dow on report Iranair wants to buy over 100 jets

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U.S. stocks are trading higher after paring gains slightly in the wake of comments from Federal Reserve Chairwoman Janet Yellen, who on Monday cautioned that investors shouldn’t read too much into Friday’s disappointing jobs report.

The Dow Jones Industrial Average DJIA, +0.76% rose 100 points, or 0.6%, to 17,908, while the S&P 500 index SPX, +0.62% added 9 points, or 0.4%, to 2,108. The Nasdaq Composite Index COMP, +0.68% climbed 25 points, or 0.5%, to 4,967.

While Yellen’s speech was slightly more hawkish than expected, it didn’t drastically alter investors’ expectations for the pace of rising interest rates, said Mohannad Aama, managing director at Beam Capital Management.

“She wanted to push the needle back toward the center” after last week’s jobs number sparked a drastic revision of investors’ rate-hike expectations, Aama said.

The likelihood of a Fed rate increase this summer dropped sharply after official data showed the U.S. economy added only 38,000 new jobs in May—far short of expectations.

Odds of an interest-rate hike in June were at 4% after Yellen’s remarks, compared with about 21% before the jobs data, according to the CME Group’s FedWatch tool, which measures trading activity in the federal-funds futures market.

“Obviously she’s more hawkish than expected by saying we can’t put too much weight on one month’s data,” Aama said. “But I don’t think it was much of a surprise that she was going to have a hedged speech.”

While Yellen said Friday’s report was “concerning,” she also referred to rising employment, household incomes, and consumer confidence as reflecting a relatively healthy domestic economy.

However, she said external factors posing a risk are the U.K. exit from the European Union—known as Brexit—and the considerable challenges facing China as it rebalances its economy. She reiterated the central bank’s focus on economic data as it determines when to normalize monetary policy.

Overall, messaging from the Fed was mixed on Monday. In remarks early in the day, Boston Fed President Eric Rosengren said the economy was still strong enough to justify a rate hike in the coming months. However, Atlanta Fed President Dennis Lockhart said the Fed should be patient before raising rates again.

Although Lockhart isn’t a voting member of the Fed’s policy committee this year, his views are watched closely because he’s seen as a key moderate voice. Rosengren is a voting member.

Some of this confusion was playing out in the market’s reaction to Yellen, said Michael Antonelli, equity sales trader at R.W Baird & Co.

“They’re having trouble forming a cohesive message and that’s why you’re seeing the market swing around,” Antonelli said.

Some analysts cautioned that there has been enough good news to justify a summer hike.

Other economic data—including reports on home sales, consumer spending and manufacturing activity—have improved in recent weeks, suggesting that the U.S. economy remains on solid footing.

On Monday, investors favored growth-oriented sectors like energy, materials and financials—the session’s best-performing sectors—while rotating out of utilities and consumer-discretionary shares, which are typically viewed as defensive plays, analysts and investors said.

Oil prices rise: Meanwhile, attacks on pipelines and equipment in Nigeria helped push oil prices higher, which helped drive gains in energy shares. The sector was up 1.9% in recent trade, making it the best performer on the S&P.

Brent crude LCOQ6, +1.69% was up 69 cents, or 1.4%, to $50.34 a barrel, and WTI oil for July CLN6, +2.16% added 74 cents, or 1.5%, to $49.36 a barrel. Crude retreated on Friday after Baker Hughes reported a rise in the number of rigs drilling for oil in the U.S., the first increase in 11 weeks.

“If you’re going to see a constructive rotation, you want to see financials in the lead and utilities lagging,” said Art Hogan, chief market strategist at Wunderlich Securities.

U.S. stocks finished modestly lower Friday, as the S&P 500 closed virtually flat for the week.


Movers: Adamis Pharmaceuticals Corp. ADMP, -53.67% sank 47% after the biopharmaceutical company said the Food and Drug Administration will require more tests for its new drug application linked to a treatment for a severe allergic reaction.

Shares of French drug giant Sanofi SA SNY, +0.34% SAN, -0.12% and U.S. partner Regeneron Pharmaceuticals Inc. REGN, +0.59% edged higher after they announced positive news on a trial of their drug dupilumab in treating a skin condition.

Shares of Ocular Therapeutix OCUL, -42.62% plunged 43% after it said a Phase 3 trial of a pinkeye treatment was unsuccessful.

Boeing Company BA, +3.26% shares were up 2.8% after a report that Iranair was in talks to potentially buy over 100 jets from the aerospace giant.

Other markets: The FTSE 100 index UKX, +1.03% gained 0.4% to 6,209.63, making it the best performance across European regional indexes.

In Asia, the Nikkei 225 NIK, -0.37% closed lower along with the Shanghai Composite Index SHCOMP, -0.16% while the Hong Kong Hang Seng Index HSI, +0.40% and Australia’s ASX 200 XJO, +0.78% closed higher.

The pound GBPUSD, -0.4270% tumbled to a three-week low at $1.4353 after two new polls showed an increase in support for the U.K. leaving the European Union. British voters will vote on the issue on June 23.

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