Week 44 in Brief
- U.S. stocks hit fresh record highs again Friday, with the Nasdaq passing the 16,000-point mark for the first time ever, as investors reacted to favorable October jobs report which showed a better-than-expected pick-up in payroll growth and another improvement in the unemployment rate.
- Investors also took stock of the Federal Reserve’s latest dovish take on interest rates tapering.
How did the major indices perform?
- The Dow Jones Industrial Average gained 203.72, or 0.6%, to 36,327.95,
- The S&P 500 rose 17.47, or 0.4%, to 4,697.53 and clinched an all-time high for the seventh straight day.
- The Nasdaq Composite added 31.28, or 0.2%, to 15,971.59.
- Trading was scattershot, though, and after climbing to an early gain of 0.8%, the S&P 500 at one point gave up virtually all of it.
- The Dow and Nasdaq nevertheless still joined the S&P 500 in setting all-time highs. The smaller stocks in the Russell 2000 performed even better, jumping 1.4%
What drove the US market?
- A stellar third-quarter reporting season, coupled with the cheery outlook on earnings growth as well as a central bank in no rush to hike interest rates, has boosted investor appetite for equities, helping them look past worries about inflation, supply chain disruptions, and labor shortages.
- Employment Data: The headline report of the day was the one from the Labor Department that showed employers hired a net of 531,000 workers in October. That was more than 100,000 above economists’ expectations. The gains were widespread across industries, and the government also revised higher numbers for job growth in earlier months. Investors see more people heading back to work and helping to clear the supply-chain bottlenecks that have hit the economy and driven up inflation.
- Treasury Yields: Stocks retrenched in the middle of the day as Treasury yields surprisingly slumped. A measure of nervousness in the stock market also made a U-turn higher around the same time. The 10-year yield, which tends to move with expectations for the economy and inflation, dropped to 1.45% and is near its lowest level since September. It was at 1.58% just two days earlier. Analysts had varying explanations for that and other sharp moves in the bond market, which some called counterintuitively.
- Coronavirus news from Pfizer: An encouraging report from Pfizer helped to lift the market, particularly companies that most need daily life to return to normal from the pandemic. Pfizer rose 10.9% after it said its experimental pill sharply cut rates of hospitalization and death for COVID-19 patients. Airlines, casinos, cruise lines, and live-event companies had similar jumps.
- Earnings Reports: Stocks have been solid after companies reported a stronger profit for the summer than analysts expected. More than four out of five companies in the S&P 500 have topped forecasts, with roughly 90% of reports in hand, according to FactSet. Companies in the index appear on track to report 39% growth in their quarterly earnings per share over year-ago levels, which would be the third-fastest since 2010.
- Politics: The U.S. House of Representatives is expected to vote on Friday on the social policy and climate-change bill and a bipartisan infrastructure bill.
Which US stocks were in focus Friday?
- Pfizer soared 10.35% to $47.88 following the release of its COVID pill trial data which showed the antiviral pill cut by 89% the chances of hospitalization or death for adults at risk of developing severe disease. Meanwhile, its rival Merck & Co. which submitted emergency use authorization for its antiviral last month – fell 8.3% to $83.00 each.
- Travel stocks rose following the news, with American Airlines, United Airlines, Delta Air Lines, cruise operators Carnival Corp and Norwegian Cruise rising between 5.6% and 5.9%.
- Online travel company Expedia jumped 15.6% and home-sharing company Airbnb rose 13% after they each reported stronger profits than expected.
- Peloton Interactive Inc sank 33.5% after it slashed its full-year sales outlook by up to $1 billion.
- Health care stocks were also lagging the market. Moderna slumped 16.6% as it continued to fall after cutting its forecast on Thursday for vaccine deliveries in 2021.
- Pinterest Inc climbed 2% after the image-sharing company expects fourth-quarter revenue growth in the high-teens percentage range as retail ad spending boomed before the holiday season.
- Google was marked 0.5% higher at $2,983.30 each, pegging the tech giant’s market value at just under $2 trillion.
- Uber Technologies shares gained 7% as passenger traffic increased and costs linked to adding new drivers stabilized.
How did the European markets perform?
- European markets closed marginally higher on Friday as investors reacted to promising news on Pfizer’s Covid-19 pill and a strong U.S. jobs report.
- The pan-European Stoxx 600 closed up by just 0.05% with most sectors finishing in the black.
- The Bank of England surprised markets on Thursday by holding interest rates at historic lows after the U.S. Federal Reserve announced Wednesday that it will begin to curb the pace of its monthly bond-buying program “later this month.”
- In economic data, eurozone September retail sales posted a surprise drop, according to Eurostat data on Friday, sliding 0.3% month-on-month as weakness in Germany weighed on the bloc.
- German industrial production also dropped unexpectedly in September, official data showed on Friday, falling by 1.1% month-on-month as output in Europe’s largest economy was hit by supply bottlenecks for materials. French industrial production also contracted by 1.3%.
- Swiss travel retailer Dufry jumped more than 9% after news of the success of Pfizer’s Covid-19 pill.
- Shares of British e-commerce firm THG climbed 3.8% after non-executive director Zillah Byng-Thorne purchased more than 32,000 of the company’s shares.
How did Asian markets perform?
- Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan % lower, while Japan’s Nikkei lost 0.61%.
- Trading in shares of Chinese developer Kaisa Group Holdings Ltd was suspended a day after the company said a subsidiary had missed a payment on a wealth management product, the latest sign of a deepening liquidity crisis in the Chinese property sector.
- An index tracking Hong Kong-listed mainland Chinese developers slipped 2.8%, and an onshore China property index lost 2%.
- More broadly, Shanghai shares lost 1% and Chinese blue chips slipped 0.5%.
Commodities and Bonds
- Global oil prices edged modestly higher following yesterday’s decision by OPEC leaders to reject calls from President Joe Biden to boost production, with the cartel instead sticking to plans for a modest output increase of 400,000 barrels per day.
- Brent was up $2.14, or 2.7%, at $82.68 per barrel while West Texas Intermediate crude (WTI) gained $2.47, or 3% to $81.28.
- Benchmark US 10-year notes last rose 19/32 in price to yield 1.46%, from 1.524% late on Friday.
- Spot gold added 1.2% to $1,813.19 an ounce.
- The U.S. dollar made solid strides against sterling, which took a beating after the Bank of England confounded markets by passing up a chance to raise interest rates on Thursday.
- Sterling fell as much as 0.5% on Friday, hitting a fresh one-month low of $1.34250. It was last down 0.07%.
- The dollar index last stood at 94.353 within sight of October’s 12-month highs.
- Investors will digest key economic data releases, including inflation data for October in the US, as well as corporate earnings.
- Streaming services will take the spotlight, with Tencent scheduled to report quarterly results on Monday, followed by Disney on Wednesday.
- Chinese entertainment juggernaut Tencent is projected to report losses amid a crackdown on tech in China.