Week 35 in Brief
U.S. stock closed mixed Friday, after disappointing monthly employment data. The employment report sparked fresh questions about the job market’s recovery from the COVID-19 pandemic amid the spread of the delta variant.
How did the major indices perform?
- The Dow Jones Industrial Average fell 74.73 points, or 0.2%, to 35,369.09.
- The S&P 500 slipped 1.52 points, or less than 0.1%, to 4,535.43.
- The Nasdaq Composite rose 32.34 points, or 0.2%, to 15,363.52.
- For the week, the Dow saw a modest 0.2% loss, while the S&P 500 gained 0.6% and the Nasdaq posted a weekly advance of 1.6%.
What drove the market?
- US Jobs Report: Data from the Labor Department showed that the U.S. economy added 235,000 jobs in August, far fewer than forecast for an increase of 720,000, but the unemployment rate dropped to 5.2% from 5.4% and touched a new pandemic low. Despite the weaker-than-expected headline figures, the data for the two previous months were raised from initial readings. June job gains were lifted to 962,000 from 938,000 and July job gains were raised to 1.05 million from 943,000. Friday’s jobs report showed a significant slowing in hiring, but a surge in wage growth, which could be a worrisome combination for the US economy.
- Federal Reserve Policy: The jobs report may raise questions about whether the Federal Reserve could delay its long-anticipated plan to start dialing back asset purchases and other policies that have been viewed as accommodative. Fed Chairman Jerome Powell has signaled that the central bank would use employment as a key indicator while it considers the end of its pandemic-era measures to add liquidity to markets. President Joe Biden in a news conference Friday on the jobs report blamed the lower-than-expected headline number on the coronavirus delta variant but said the pace of job creation still represents growth.
- In other data, a reading of activity in the services sector from the Institute for Supply Management, the ISM services survey, fell to 61.7 in August from a record 64.1. “The services sector is still holding on,” said Tilley. “It’s still in strong growth territory.
- Japanese stocks: Elsewhere, Japanese stocks far outperformed their Asian peers Friday after Prime Minister Yoshihide Suga, whose government has come under fire for its handling of the pandemic, said he would resign ahead of national elections this year. Investors are optimistic that Japan will find a stronger leader. Japan Nikkei 225 closed up 2.1% on Friday and produced a 5.4% weekly advance, marking the strongest weekly gain since the period ended Nov. 6, 2020, FactSet data show.
Which stocks were in focus Friday?
- Shares of Uber Technologies Inc. fell 2.6% as the ride-sharing company was set to benefit from a potential investment in China-based rival Didi Global Inc. DIDI by China’s government, according to Gordon Haskett analyst Robert Mollins. Shares of Didi rose 2.4%.
- Kraft Heinz Co. disclosed Friday that it will pay a $62 million civil penalty to settle an investigation by the Securities and Exchange Commission into accounting policies, procedures, and internal controls. Its stock dipped 0.7%.
- Shares of Apple Inc. rose 0.4% after Wedbush’s longtime bullish analyst Dan Ives said underlying demand for iPhones continues to look strong ahead of the launch of the newest version.
How did the European markets perform?
- European markets closed lower on Friday as investors reacted to key economic indicators out of the eurozone and the U.S.
- London’s FTSE 100 ended Friday down 0.4% as the pan-European Stoxx 600 closed 0.6% lower, pushing the index into the red with a weekly decline of 0.1%; Paris’ CAC 40 fell 1.1% on the session but logged a weekly advance of 0.1%, and Frankfurt’s DAX closed off 0.4% and fell 0.5% for the week.
- In economic data, eurozone business activity remained robust in August despite the impact of the Delta variant of Covid-19 and broad supply chain problems. The final IHS Markit composite PMI (purchasing managers’ index) reading for the bloc dropped to 59.0 from July’s 15-year high of 60.2, remaining well clear of the 50 mark that separates expansion from contraction.
- German polling on Thursday showed the Social Democrats opening up a five-point lead over Chancellor Angela Merkel’s Christian Democratic Union in the run-in to the Sept. 26 national election in Europe’s largest economy.
- In terms of individual share price movement, Allfunds Group jumped 11.6% to lead the Stoxx 600 after strong first-half results, while at the bottom of the index, Ocado slid 4%.
How did Asian markets perform?
- Shares in Asia-Pacific were mostly higher on Friday, with Chinese stocks declining over concerns about slowing growth, while Japanese markets surged after Prime Minister Yoshihide Suga said he will not be running in the upcoming leadership election.
- The Shanghai Composite lipped 0.4% but was up 1.7% for the week, and the Hong Kong Hang Seng Index dropped 0.7% but climbed 1.9% on the week.
- Chinese technology stocks ended the week lower as investors remained concerned with regulatory crackdowns in China, and news that tech giant Alibaba Group will donate $15.5 billion to “common prosperity” in China by 2025.
- Investors are worried that the donation will potentially impact Alibaba’s balance sheet, and that other tech firms will be forced to offer their donations.
Commodities and Bonds
- The 10-year Treasury note yield rose about 3 basis points to 1.322%. Bond yields and prices move in opposite directions.
- Oil prices ended lower Friday, with West Texas Intermediate crude for October delivery falling 1% to settle at $69.29 a barrel. Gold futures rose 1.2% to $1,833.70 an ounce, settling at the highest level since mid-June.
- The ICE U.S. Dollar Index was down 0.2% for a weekly decline of 0.7%.
- The dollar’s direction remains in limbo as financial markets await a clearer path from the U.S. Federal Reserve, according to a Reuters poll of FX strategists who were split on where they expected the currency to trade over the next three months.
- The corporate calendar is relatively quiet next week, which will be a four-day trading week in the U.S. due to the Labor Day holiday on Monday.
- Investors will parse economic data including the eurozone unemployment report and producer prices in the US, among others.