The Dow Jones Industrial Average turned modestly higher early Friday, after opening in negative territory, and the technology-laden Nasdaq Composite rose, even as the April nonfarm payrolls report came in way below estimates, raising questions about the timing and pace of the labor-market rebound from COVID.
The weakness reflected in the jobs report may support some views that central bankers in the U.S. will keep monetary policy accommodative for an extended period.
How are stock benchmarks performing?
The Dow Jones Industrial Average
was up 108 points to 34,658, a gain of 0.3%, establishing an intraday record high at 34,663.39.
The S&P 500 index
added 21 points, or 0.5%, at 4,222. carving out its own intraday all-time high at 4,225.24.
The Nasdaq Composite Index
gained 125 points to about 13,755. a gain of 0.9%,
On Thursday, the Dow
added 318.19 points to reach a record close of 34,548.53; a gain of 0.9%, the S&P 500
moved up 34.03 points, or 0.8%, at 4,201.62; while the Nasdaq Composite Index
traded up 50.42 points, or 0.4%, to 13,632.84, ending a streak of four straight losses.
What’s driving the market?
Markets may be interpreting bad news as good news on Friday.
The U.S. created 266,000 new jobs in April, on a seasonally adjusted basis, well below forecasts ranging from a gain of 755,000 to 1.25 million. The unemployment rate rose to 6.1% in April from 6%, even as average hourly wages rose 21 cents to $30.17.
On top of that, gains in March were lowered to 770,000 from 916,000, injecting at least some uncertainty into the pace of the rebound from COVID.
Some of the most bullish projections from Aneta Markowska and Thomas Simons at Jefferies LLC saw net job gains last month hitting 2.1 million, which would have marked the fastest growth since June of 2020.
The report, however, may bolster the view that the Federal Reserve will keep accommodative policies in place for a prolonged period, which had come into question in recent weeks on the back of evidence of a healthy rebound from the coronavirus outbreak.
“One thing is clear that the loose monetary policy isn’t going anywhere soon,” wrote
Naeem Aslam, chief market analyst at AvaTrade in a note after NFP.
Also speaking with Bloomberg TV after the Friday jobs report, Minneapolis Fed President Neel Kashkari said the surprise in the data shows the importance of basing monetary policy on outcomes, not forecasts.
“For all those people who have been saying ‘oh my gosh, the Fed needs to normalize quantitative easing,’ today’s job report is just an example of – we have a long way to go,” Kashkari said, in the interview.
The policy maker said he sees no shift in the central bank’s easy-money policy stance and anticipates that a jump in inflation will be transitory.
The 10-year Treasury note yield
briefly fell to around 1.50%, helping to create a runway for technology stocks that tend to be sensitive to bond yields.
Friday’s jobs report comes after weekly initial unemployment benefit claims in the U.S. fell to 498,000 for first time in pandemic era in data published Thursday.
U.S. stock indexes have been mostly advancing in the past month, seeing record highs, driven by evidence of improvement in the economy and by strong results from American corporations reporting first-quarter earnings.
Shares of tech companies, in particular, had taken it on the chin after prospering during the lockdown protocols in place last year to combat the coronavirus pandemic. Investors have been rotating their investments into assets seen as performing better during the economic recovery, including energy, financials, industrials, materials and transportation stocks.
Meanwhile, the healthcare sector remains in focus after President Joe Biden’s administration has advocated waiving intellectual property rights to potentially enable companies in developing countries to manufacture their own COVID vaccines. Companies like Pfizer,
Johnson & Johnson
have seen their stocks fall as a result this week.
Pfizer and its German partner BioNTech SE also said Friday they have initiated submission of a Biologics License Application (BLA) with the U.S. Food and Drug Administration for full approval of their COVID-19 vaccine in individuals 16 years of age and older.
In public health news, the global tally for the coronavirus-borne illness rose above 156 million on Friday, according to data aggregated by Johns Hopkins University, while the death toll rose above 3.25 million. India, meanwhile, remains second to the U.S. by cases at 21.5 million and third by fatalities at 234,083. India added a record of 414,000 new cases in a 24-hour period, a fresh global record, and almost 4,000 deaths, according to its health ministry.
Which companies are in focus?
- Shares of Cigna Corp. CI gained 0.5% in premarket trading Friday, after the health services company reported first-quarter profit and revenue that rose above expectations, as total customer relationships grew 14% and pharmacy customers increased 28%.
- USA Today parent Gannett Co. Inc. GCI reported Friday a wider net loss on revenue that fell more than some analysts expected, citing negative impacts from the COVID-19 pandemic as well as “general trends” hurting the publishing industry.
- Spectrum Brands Holdings Inc. SPB posted stronger-than-expected earnings for its fiscal third quarter Friday, and raised its fiscal 2021 guidance.
How are other assets faring?
- In Europe, the Stoxx Europe 600 SXXP and London’s FTSE 100 UKX, were each gaining 0.6%.
- The 10-year Treasury note yield TMUBMUSD10Y shed 2.7 basis points to 1.53%.
- The greenback was 0.4% lower, based on the ICE U.S. Dollar Index DXY.
- Gold futures GC00 jumped $16.50, or 0.9%, to settle at $1,832 an ounce, trading around its highest since February on Comex. U.S. crude futures CL.1 lost 26 cents, or 0.4%, to $64.45 a barrel on the New York Mercantile Exchange, threatening to snap a 3-session string of gains.
- In Asian trade, Hong Kong’s Hang Seng Index HSI edged 0.1% lower. China’s Shanghai Composite SHCOMP closed 0.7% lower, while Japan’s Nikkei 225 NIK rose less than 0.1%.