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U.S. stock indexes traded at records Friday after a report on employment showed fewer jobs were created in November than had been estimated by economists, perhaps bolstering the case for further fiscal stimulus from Congress.
What are major benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.56% rose 155 points or 0.5%, to 30,124, carving out an intraday record at 30,157.18, while the S&P 500 SPX, +0.59% gained 24 points, or 0.7%, to about 3,691. The Nasdaq Composite Index COMP, +0.45% rose 77 points, or 0.6%, to 12,455.
All three major benchmarks were trading on track to close at all-time highs.
Stocks ended mixed in a choppy session Thursday, with the Nasdaq Composite eking out a record close.
What’s driving the market?
The U.S. Labor Department report showed that 245,000 jobs were created in November, marking the smallest gain since the economy began to emerge from lockdown in the spring, as the unemployment rate fell to 6.7% from 6.9%.
Investors were looking at the strength of the labor market as the COVID-19 pandemic worsens for clues at to whether lawmakers in Washington might finally pass another round of financial aid to bolster the economic recovery.
Read: Why a rising stock market and a falling dollar are likely to keep going hand in hand
“We’ve gotten a big step closer to consensus on stimulus,” said Paul Kim, CEO of Simplify Asset Management “Everything looks good on the surface but you scratch a little below the surface, you see job growth stagnating, small and medium businesses starting to hurt, you see a binary market. It’s the old saying, the markets are not the economy. Markets are looking way ahead and the fundamental segments of the economy are saying, hey wait a minute.”
Kim thinks the recent jump in Treasury yields shows the “most conservative” corner of financial markets starting to take the recovery story seriously. Yields had lagged other assets, he noted.
Read: Job growth has seriously slowed’ — economists react to ‘disappointing’ November employment report
Some analysts argued that a weaker-than-expected reading could be a positive for equities because it would inject more urgency into talks between lawmakers over another round of pandemic aid.
“Noticeably though, the market’s response to today’s weak jobs number is muted. It seems like investors are focusing on the prospect of additional fiscal stimulus and today’s weak number potentially pushes the negotiations over the finish line,” wrote Seema Shah, chief strategist, Principal Global Investors, in emailed comments.
Senate Majority Leader Mitch McConnell, R-Ky., said Thursday that reaching a compromise on another coronavirus fiscal stimulus package was possible, as long as Democrats moved toward Republican positions.
The remarks came after congressional Democratic leaders said Wednesday they were endorsing a bipartisan proposal estimated to cost about $908 billion, well above what McConnell has supported but well below the more than $2 trillion effort Democrats had pushed in talks ahead of the election.
“Since capital markets have been trading on nothing more than government intervention on both [the] monetary and fiscal side ever since the March panic lows, any prospect of additional immediate stimulus would be viewed as bullish by the market and indexes would likely sprint to fresh record highs into the close of the week ,” said Boris Schlossberg, managing director of BK Asset Management, in a note.
Stocks saw historic gains in November and continued to push higher this week in a rally tied largely to optimism over progress toward COVID-19 vaccines, with investors looking past a sharp rise in new cases and deaths over the same period.
Stock indexes gave up gains in late trade Wednesday though after The Wall Street Journal reported that Pfizer Inc. PFE, +0.10% expected to ship half the predicted numbers of vaccine doses this year.
Analysts said the reaction may have been overdone. A Pfizer spokesperson told Barron’s that the company’s guidance since the second week of November had been for global deliveries of 50 million doses in 2020 and 1.3 billion in 2021.
Pfizer and its partner, BioNTech SE BNTX, +0.61% have applied for emergency use approval for its vaccine from U.S. regulators, who are expected to decide within weeks. The U.K. earlier this week authorized a vaccine for emergency use, with initial distribution set to begin next week.
In other economic reports, U.S. factory goods orders rose for the sixth straight month in October, the Commerce Department said Friday. Orders for manufactured goods rose 1% after a 1.3% gain in the prior month.
Minneapolis Federal Reserve Bank President played down prospects for a rapid pickup in prices. Kashkari said he didn’t think “high” inflation was “around the corner,” during a moderated discussion sponsored by a southeast Minnesota business association.
Which companies are in focus?
- Pfizer Inc. PFE, +0.10% shares were up less than 0.1%.
- Shares of drugmaker Moderna Inc. MRNA, -2.01% were down 4.2% after it said late Thursday that its COVID-19 vaccine candidate has potential to confer longer-term immunity, and that it expects to have 20 million doses of the trial vaccine at hand in the U.S. this year.
- DocuSign Inc. DOCU, +4.85% shares surged 5.4% after the maker of technology that facilitates digital contracts delivered results that exceeded earnings expectations.
- Shares of Ulta Beauty Inc. ULTA, -3.88% fell 2.4% after reporting a net sales figure that missed forecasts, though adjusted earnings topped the Wall Street consensus.
- Cloudera Inc. CLDR, +8.20% shares were on the rise, up about 10%, after the enterprise software company’s third-quarter revenue and adjusted earnings beat expectations.
- Share of gun maker Smith & Wesson Brands Inc. SWBI, +1.71% were 1.3% higher after reporting profit rose in the second quarter of fiscal 2021 as revenue more than doubled in the period.
How are other assets performing?
The pan-European Stoxx 600 index SXXP, +0.59% was trading 0.6% higher to end the week, while the U.K.’s FTSE 100 index UKX, +0.92% climbed 0.9%.
In Asian markets, China’s Shanghai Composite Index SHCOMP, +0.07% finished less than 0.1% lower, the CSI 300 finished 0.2% higher, while Hong Kong’s Hang Seng HSI, +0.40% booked a 0.4% gain. Japan’s Nikkei 225 NIK, -0.21% ended 0.2% lower on Friday.
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.970% rose 6 basis points to around 0.971% amid hopes for a fiscal package. Yields and prices move in opposite directions.
The ICE U.S. Dollar Index DXY, -0.08%, a gauge of the greenback’s strength against its major rivals, was 0.1% lower, around a two-year low.
Crude-oil futures CL.1, +1.42% s gained 24 cents, or 0.3%, to trade at $45.87 a barrel on the New York Mercantile Exchange after OPEC+ agreed to curb production. Gold futures GCG21, -0.10% ticked down 0.2% to trade at $1,838.20 an ounce as traders embraced riskier assets.
