Week 31 in Brief
- U.S. stocks rose on Friday after a better-than-expected jobs report showed the economy continuing to rebound but investors remained concerned about Federal Reserve policy.
- The Dow and S&P 500 closed at record highs Friday, with major U.S. stock benchmarks booking weekly gains of around 1%.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average rose 144.26 points, or 0.4%, to a record 35,208.51.
- The S&P 500 added 7.42 points, or 0.2%, to a record 4,436.52.
- The Nasdaq Composite fell 59.36 points, or 0.4%, to 14,835.76.
- On Thursday, the Dow industrials rose 271.58 points, or 0.78%, to finish at 35,064.25. The S&P 500 gained 26.44 points, or 0.6%, to close at 4,429.10 and the Nasdaq Composite advanced 114.58 points, or 0.8%, to end at 14,895.12, both setting fresh closing records.
- For the week, the Dow gained 0.8%, while the S&P 500 advanced 0.9% and the tech-heavy Nasdaq rose 1.1%.
What drove the market?
- Consumer discretionary shares and technology stocks were hurt by a rise in long-dated benchmark bond yields and a rise in the U.S. dollar though, putting pressure on growth stock areas of the market.
- Investors also tilted toward undervalued market segments, buying financials, energy, and materials shares after the employment report.
- Positive employment data: The record finishes for the Dow and S&P 500 came after investors digested a fresh employment report for July from the U.S. Labor Department that saw a better-than-expected 943,000 jobs created and the unemployment rate fall to 5.4% from 5.9%. The gain in new jobs exceeded what was seen in June and offers some hope that the stalled employment recovery is regaining some steam. The July jobs data came as businesses have been struggling with back-to-work plans due to the fast spread of the delta variant of Covid, which has been hitting the U.S. and other countries worldwide. The strong jobs report may be underpinning some hope for ongoing improvement in quarterly corporate earnings in the remainder of the year from American companies after what has thus far been a strong second quarter.
- Some analysts took the report as giving credence to the Federal Reserve’s timeline to taper its quantitative-easing measures, or the $120 billion a month bond-buying program that helped to ease tight financial conditions during the height of the pandemic turmoil back in March and April of 2020.
- Federal Reserve Policy. Investors have speculated that the U.S. central bank may signal its intention to scale back its asset-purchase program at a monetary policy gathering in Jackson Hole, in northwestern Wyoming, by the end of this month.
- Earlier this week, Federal Reserve Vice Chairman Richard Clarida, said the conditions for the first-rate increase will be met “by year-end 2022” allowing for the first move in 2023. The Fed vice chairman said he sees the recent rise in inflation as “transitory.” But he added that the risks of higher inflation are greater than the risks of low inflation.
- In other economic news, a reading on U.S. wholesale inventories increased 1.1% in June.
- On the public health front, the U.S. is averaging more than seven times as many new COVID cases a day as it was at the beginning of July, according to a New York Times tracker, the majority of whom are in unvaccinated people.
Which stocks were in focus Friday?
- Groupon shares fell 14.1% even after the deals platform easily beat earnings forecasts.
- Yelp shares rose 5.2% after the online reviews site reported a surprise profit and a lift to its annual guidance.
- Novavax shares slid 19.6% as the biotech reported a wider-than-expected loss on the quarter, and said it push back submitting its COVID-19 vaccine to the Food and Drug Administration for emergency use authorization until the fourth quarter.
- Shares of DraftKings Inc. rose 2.2% after the sports betting company raised its full-year revenue outlook, but the company disclosed an investigation by the Securities and Exchange Commission concerning allegations over “black-market gaming” and money laundering made by short-seller Hindenburg Research.
- Shares of Moderna Inc. slipped 0.6% after the biotechnology company with one of the three COVID-19 vaccines granted emergency use authorization in the U.S. was downgraded by a longtime bullish analyst, saying that “the dream is alive, but valuation moves us to the sidelines.”
- Shares of Goodyear Tire & Rubber Co. rose 6.6% after the tire maker reported a second-quarter profit that was double what was expected, with revenue from all geographic regions topping forecasts, as the negative effect on demand from the COVID-19 pandemic “moderated significantly.”
- Shares of Norwegian Cruise Line Holdings Ltd. rose 2.9% after the cruise operator reported a narrower-than-expected second-quarter loss but revenue that was a bit light and cash burn that topped guidance.
- Shares of Lear Corp. declined 0.1% after the auto seating and electronics systems company reported second-quarter profit that beat expectations, revenue that nearly doubled but was shy of forecasts, and cut its full-year outlook citing the impact of semiconductor and component shortages.
- Gannett Co. Inc. shares jumped 14.2% after the USA Today parent posted a surprise profit for the second quarter as revenue topped estimates.
- The U.S. Postal Service reported Friday’s fiscal third-quarter losses that widened to nearly $3 billion, with revenue rising 4.8% but expenses growing 8.3% amid higher transportation costs.
- Canopy Growth Corp. shares gained about 0.1% in U.S. trading after the Canadian cannabis company posted a profit for its fiscal first quarter, thanks to non-cash fair value changes in some of its holdings of more than C$600 million ($479.9 million).
How did the European markets perform?
- European markets closed mixed on Friday as investors monitored a fresh round of corporate earnings and the global spread of the delta Covid-19 variant.
- The pan-European Stoxx 600 provisionally ended up 0.02%, with the banking index adding 2% to lead gains, while health care stocks fell 1%.
- The DAX is higher by 0.06%, while the CAC 40 is leading the FTSE 100 lower. They are down 0.43% and 0.07% respectively.
- Earnings remain in focus in Europe, with the world’s largest shipping firm Maersk reporting Friday, along with Allianz, Vonovia, and the London Stock Exchange.
- Maersk, the world’s largest container shipping firm, has posted a sharp increase in second-quarter earnings as congestions and bottlenecks continue to drive up shipping rates.
- The Danish giant reported earnings before interest, tax, depreciation, and amortization (EBITDA) of $5.1 billion, a 200% increase from the $1.7 billion reported in the same period last year. Maersk shares were 0.5% on Friday afternoon.
How did Asian markets perform?
Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.14%, while the Nikkei 225 led the Hang Seng lower. They fell 2.07% and 0.27% respectively.
Commodities and Bonds
- The yield on the 10-year Treasury note rose about 7 basis points to settle at 1.288%. Yields and debt prices move in opposite directions.
- Oil futures for the U.S. benchmark ended 1.2% lower at $68.28 a barrel, while gold futures settled at $1,763.10 an ounce for a 2.5% loss.
- The dollar rose sharply on Friday, boosted by a strong U.S. jobs report toward its biggest weekly gain in seven weeks.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, rose 0.6%.
- Against the safe havens of the Japanese yen and Swiss franc, the dollar had its biggest daily gains since June, reflecting a risk-on tone as well as the appeal of higher U.S. interest rates.
- The greenback rose 0.9% against the Swiss franc and 0.4% on the Japanese yen, which traded at 110.215 to the dollar.
- The euro fell 0.6% to $1.1759, pressured early in the session by weaker than expected German industrial orders data.
- The British pound fell nearly 0.4% to $1.3878.
Investors are looking ahead to another busy week of earnings reports and some key economic releases that will provide more insight into the health of the consumer and housing market.