Wall Street will closely watch the U.S. jobs report number released Friday.
Angela Weiss/AFP via Getty ImagesThe Dow, the S&P 500 and the Nasdaq Composite closed at new records Friday, after the U.S. added more jobs than expected in October. However, the result wasn’t strong enough to spark fears that the Federal Reserve will hike interest rates hastily.
The Dow Jones Industrial Average rose 204 points, or 0.6%, ending the day at 36,327.95 points. Meanwhile, the S&P 500 and the Nasdaq Composite advanced 0.4% and 0.2%, respectively. The indexes rose just after the jobs report was released in the morning, but finished below their intraday highs.
The U.S. added 531,000 jobs in October, above estimates for 450,000 and above September’s revised result of 312,000. The unemployment rate fell to 4.6%. Job gains were particularly strong in the one of the most Covid-19-sensitive areas: leisure and hospitality. That sector added 164,000 jobs.
The jobs result “really is a Goldilocks number,” said Marvin Loh, senior global macro strategist for State Street. “The job market is recovering. The Fed’s going to wait [to raise interest rates].”
Economists were indeed expecting that, as pandemic-related jobless benefits expire, people will be incentivized to go back to work. Investors want to see that people are getting back to work—enabling sustainably strong consumer spending—but that the job market won’t heat up too quickly. If it does, the Fed could be compelled to reduce its bond buying program faster or hike short-term interest rates sooner rather than later.
For now, markets aren’t concerned that the potential inflation spurred by more people in the workforce will make the Fed more aggressive on rate hikes. The 2-year Treasury yield fell to 0.39%, below its level just before the jobs report.
Stocks losing some steam can be partially blamed on a drop in long-term bond yields. The 10-year Treasury yield declined to 1.45% from a daily high of 1.54%. The bond’s prices rises as the yield falls. That indicates some might be concerned about low longer-term economic growth and inflation.
In reality, the move down in the yield might be a function of market technicals, rather than anything scary on the economic front. There are probably “people that are squeezing the shorts,” said Dennis Debusschere, founder of 22 Research.
In any event, the falling yield may be spooking other market participants. “There’s clearly some risk that 10 year yields are sniffing out a problem,” Debusschere said, referring to “a growth slowdown.”
Overseas, the pan-European Stoxx 600 was flat. Hong Kong’s Hang Seng Index declined 1.4%.
Hong Kong trading was hit by renewed fears of the heavily indebted Chinese property sector. Shares in developer Kaisa Group Holdings (1638.H.K.) were suspended in Hong Kong after it missed payments on wealth products and raised liquidity concerns. Units of China Evergrande (3333.H.K.), the struggling real estate group at the center of property woes, face payment deadlines for offshore bond coupons due tomorrow.
Here are seven stocks on the move Friday:
Pinterest (PINS) stock gained 5.9% after the company reported a profit of 28 cents a share, beating estimates of 23 cents a share, on sales of $633 million, above expectations for $630.9 million.
Airbnb (ABNB) stock rose 13% after the company reported a profit of $1.22 a share, beating estimates of 72 cents a share, on sales of $2.2 billion, above expectations for $2.1 billion.
Peloton Interactive (PTON) stock fell 35.3% after the company reported a loss of $1.25 a share, worse than estimates of a loss of $1.07 a share, on sales of $805 million, below expectations for $811 million.
Pfizer (PFE) stock gained 10.9% after the company said its Covid-19 pill should reduce the risk of hospitalization or death by 89%. That’s better than Merck’s pill. Merck (MRK) shares fell 9.9%. Moderna (MRNA) and Regeneron (REGN) stock fell 16.6% and 5.6%, respectively.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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November 06, 2021 at 04:27AM
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