U.S. equity-index pulled back Friday morning, after the benchmarks carved out fresh records, as investors assessed the longer-term economic outlook in the wake of the jobs report for December which showed the first monthly job losses since April amid an acceleration of cases of COVID-19.
Markets were looking at sharp weekly gains, however, in the first week of trading in 2021 and experts aren’t surprised to some moderation in the bullish uptrend for the market.
How are stock benchmarks performing?
- The Dow Jones Industrial Average
was trading 58 points, or 0.2%, lower at 30,983, after touching an intraday high at 31,140.67.
- The S&P 500 index added 7 points at 3,810, a gain of 0.2%, after the broad-market benchmark touched a record intraday peak at 3,824.40, and the index also briefly turned negative.
- The Nasdaq Composite Index
rose 58 points, or 0.4%, to 13,126, after hitting an intraday record high at 13,193.99.
On Thursday, the market booked a quartet of record closing highs after Congress confirmed President-elect Joe Biden’s election win:
- The Dow rose 211.73 points, or 0.7%, at 31,041.13, closing at records.
- The S&P 500 index closed up 55.65 points, or 1.5%, to reach a record at 3,803.79.
- The Nasdaq climbed 326.69 points, or 2.6%, to reach a milestone at 13,067.48, a closing high.
- The Russell 2000 index
gained 1.89%, its third consecutive rise of 1% or more.
For the week, the Dow is headed for a gain of 1.6%, the S&P 500 was looking at a 1.7% advance, the Nasdaq Composite was up 2% thus far on the period and the Russell 2000 index was looking at a 6.8% weekly surge.
What’s driving the market?
Stocks wobbled early Friday, after initially rising as investors digested the closely followed report on jobs showed that the U.S. economy lost 140,000 jobs in December, well below forecast of a gain of 55,000.
The U.S. unemployment rate remained unchanged at 6.7%, but data from the Labor Department report also suggests that a number of Americans left the workforce.
The decline in employment was the first since last April, when the U.S. lost a 20.8 million jobs in that one month alone
“With large swaths of the U.S. economy shut down throughout December to combat the spread of Covid-19, it’s no surprise that the economy lost jobs in December,” wrote James McDonald, CEO and chief investment officer of Hercules Investments.
The government report comes after a private-sector employment reading out on Wednesday from ADP showed 123,000 private-sector jobs in December, as consumer and business activity in some states was affected by lockdowns to limit the spread of COVID-19 which has worsened across much of the country. The government report showed that 95,000 private-sector jobs were lost in December.
Indeed, the U.S. registered record deaths on Thursday, with at least 4,111 lives on Thursday lost from COVID, representing the most in a single day since the start of the outbreak, according to a New York Times tracker, which also came amid a record 280,028 new cases of the disease.
“As we had highlighted in prior publications, measures put in place to stop the spread of COVID-19 had a big impact this month, specifically in the leisure and hospitality sector where payrolls fell 498K,” wrote Jefferies analysts Thomas Simons and Aneta Markowska, in a note after the data was published.
The analysts estimate that if it weren’t for renewed lockdowns payrolls would have showed a gain of 358,000.
The modest moves in Wall Street equities also come after a dramatic political week that included wins by Democrats against incumbent Republicans in the U.S. Senate that shift the balance of power in Congress, along with rioters storming the Capitol building after being encouraged by President Donald Trump to try to block Congress from certifying President-elect Joe Biden’s November win.
The chaos in the Capitol has led to resignations by some members of Trump’s administration, including Education Secretary Betsy DeVos, Transportation Secretary Elaine Chao, and the first lady’s chief of staff as well as a top official who dealt with China.
President Donald Trump, in a video released on Thursday night, finally acknowledged his election defeat and vowed a smooth transition of power.
Markets, however, have focused on the political wins by Democrats Jon Ossoff and Raphael Warnock in the Senate runoff elections on Tuesday, which raises the prospect of additional coronavirus fiscal relief measures and other legislation that could boost the U.S. economy after Biden becomes president in 12 days.
The weak jobs data may embolden bullish investors hoping for broader and deeper governmental measures to aid unemployed Americans and troubled businesses.
“This report ensures that there will be increased fiscal spending on relief / stimulus checks sent out,” said Quincy Krosby, chief market strategist at Prudential.
On top of that vaccine optimism also has bolstered investors’ outlook for the economy. Pfizer Inc.
and German partner BioNTech SE
said Friday an in vitro study found that their COVID-19 vaccine neutralizes the two new highly infectious variants that have emerged in the UK. and South Africa.
However, worries that the vaccines that have been authorized aren’t being rolled out efficiently are raising some concerns about how quickly the economy and jobs market can bounce back among Wall Street strategists.
“With 3/4 of the vaccines now available not being utilized for inoculations, the need for a coordinated effort to improve the rollout is dramatic,” wrote Krosby. “The employment landscape will not improve until the speed of vaccinations gains momentum,” the analyst said.
Which stocks are in focus?
- Bionano Genomics Inc.
said Friday it has priced an underwritten public offering of 29 million shares at $3.05 a share. Shares were down over 14%.
- Shares of Hologic Inc.
are up 3.9% in trading Friday after the medical technology company posted preliminary revenue figures ahead of the consensus forecast.
- Bed Bath & Beyond Inc.
said in a filing that it has entered into a share repurchase agreement with JPMorgan in which the home goods retailer will acquire $150 million shares. Shares were trading 3.5% higher on Friday.
- Acacia Communications Inc.
said Friday morning that it has opted to terminate its merger agreement with Cisco Systems Inc
Shares of Acacia were up nearly 13% and Cisco shares gained 0.3%.
- Apple Inc.‘s shares
were in focus as reports pointed to potential joint ventures for the iPhone maker’s electric-vehicle ambitions. Shares were up 0.3%.
How are other assets faring?
- The 10-year Treasury note was up 2.8 basis points at 1.10%, as traders bet on stronger inflation pressures. Bond yields rise as prices fall.
- Oil futures traded higher Friday. Crude for February delivery
gained 1.5% to $51.55 per barrel.
- Gold futures
tumbled 1.8% to trade at $1,878.50 an ounce.
- The pan-European Stoxx 600 Europe index
was trading 0.6% higher, while London’s FTSE 100
was gaining 0.1%.
- In Asia, Hong Kong’s Hang Seng Index
rose 1.2%, while the Shanghai Composite
shed 0.1% and Japan’s Nikkei 225
- The ICE U.S. Dollar Index
a measure of the U.S. currency against a basket of six major rivals, was off 0.1%.
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