Equities rallied strongly on Friday. The Russell 2000 Index led all major indexes with an increase of 3.79 percent. The Dow Jones Industrial Average trailed with a gain of 0.99 percent.
SPDR Healthcare (XLV) advanced 3.27 percent. iShares Nasdaq Biotechnology (IBB) returned 7.65 percent. Biogen (BIIB) pulled the sector higher with positive initial trials of a new Alzheimer’s drug. Shares gained 19.6 percent on Friday. Biogen was the third-largest holding in IBB coming into Friday trading at 7.85 percent of assets.
Technology also performed well. SPDR Technology (XLK) retuned 2.24 percent, iShares North American Software (IGV) 3.79 percent, and First Trust Dow Jones Internet (FDN) 3.15 percent.
Among the smaller S&P 500 sectors, utilities and telecom benefited from falling long-term interest rates. SPDR Utilities (XLU) gained 2.49 percent and iShares U.S. Telecommunications (IYZ) 2.36 percent.
The Markit and ISM manufacturing PMIs both exceeded expectations this week. The ISM survey climbed from 58.7 to 60.2. The Markit survey hit 55.4, beating a 54.6 forecast. Tariffs on steel lifted costs for steel users. Domestic demand strengthened. Several emerging markets including Brazil and Turkey saw their PMIs slide below 50. Any reading over 50 signals expansion.
Construction spending rose 0.4 percent in May, beating forecasts of 0.0 percent. Spending increased 4.5 percent from a year-ago. Government spending on infrastructure was responsible for the beat.
Auto sales hit an annualized pace of 17.5 million in June. Analysts expected 17 million. Factory orders climbed 0.4 percent in May, beating forecasts of 0.0 percent. The services PMIs also showed an expanding service sector, with the ISM services index hitting 59.1 percent.
The U.S. economy created 213,000 new jobs in June, but the unemployment rate rose to 4.0 percent as the labor force participation rate increased. The government does not count workers who stop looking for jobs as part of the labor market. Under these conditions, a rising unemployment rate is bullish for the economy.
The U.S. government implemented tariffs on $34 billion worth of Chinese goods on Friday. The U.S. plans tariffs on another $200 billion worth of goods in retaliation for Chinese technology and intellectual property infringement. China retaliated with tariffs on U.S. goods and slowed clearance of U.S. goods at its ports. Many assets directly impacted by the tariffs, such as soybeans, rallied strongly as traders closed short positions. Teucrium Soybean (SOYB) fell 16 percent from late May through early July, but it rallied 4 percent on Friday.
Oil prices jumped above $74 a barrel last week and traded as high as $75 this week. Natural gas slipped despite high electricity usage amid a heatwave in many parts of the country. The U.S. Dollar Index climbed back above 95 on Monday, but closed down 1.3 percent for the week.
A weaker U.S. dollar didn’t help foreign share performance. SPDR S&P 500 (SPY) gained 1.65 percent. It was in line with iShares MSCI Emerging Markets (EEM) and iShares MSCI EAFE (EFA), which returned 1.69 and 1.52 percent, respectively.