Week 5 in Brief
How did the major indices perform?
U.S stocks rose on Friday, with the major indices notching their best weekly gains since November despite disappointing January jobs report that suggested a stalling recovery in the labor market and supported the case for additional fiscal stimulus;
- Investors remained upbeat despite fears of a market correction that took hold last week inspired by a Reddit-led group of individual investors; those fears gave way to fresh gains for stocks this week, putting the rally for the major benchmarks on track for their best weekly gains in about three months, FactSet data show.
- Each of the three major equity indexes traded higher, and the S&P 500, Dow, and Nasdaq posted their best weekly gains since November. On Friday, the Dow Jones Industrial Average rose 92.38 points, or 0.3%, to close at 31,148.24, just shy of its Jan. 20 closing record at 31,188.38; the S&P 500 gained 15.09 points, or 0.4%, to settle at 3,886.83, a fresh - its seventh in the year to date; while the Nasdaq Composite climbed 78.55 points to reach 13,856.30, a gain of 0.6%, also a new high – its eighth of the year.
- For the week, the Russell gained 7.6%, the Nasdaq added 6%, the S&P 500 index advanced 4.7%, and the Dow ended 3.9% higher.
What drove the market?
- Economic data: The U.S. Labor Department’s employment report showed the US added 49,000 jobs in January, slightly below the 50,000 payrolls expected by economists. The unemployment rate fell to 6.3%, better than projections of 6.7%. December’s numbers were revised much lower, with the month posting a loss of 227,000 from the initial reading of 140,000 jobs lost. The results affirm the view that the recovery in the jobs market is stalling out amid the COVID-19 pandemic and could push US lawmakers to fast-track the approval of President Biden’s proposed stimulus package and further stimulus spending from the Biden administration. -__ Coronavirus stimulus__: The Senate passed a budget resolution early Friday that would allow for fast-tracking of the $1.9 trillion coronavirus relief plan, even without Republican votes. The package includes $1,400 stimulus checks, a supplemental jobless benefit, and Covid-19 vaccine and testing funds. President Joe Biden on Friday warned that Republican efforts to pass a smaller bill would only prolong the economy’s path to recovery.
- Corporate Earnings: Investors were upbeat on healthy earnings from US corporations in the second-busiest week of fourth-quarter reporting season results. Some of the biggest names in the tech industry - Amazon, Alphabet, and Alibaba – reported better than expected earnings this week.
- Vaccine News: Johnson & Johnson applied for an emergency use authorization of its single-shot COVID vaccine. Meanwhile, Covid-19 hospitalizations in the US continued to fall, to 88,668 on Thursday, the lowest total since Nov. 24.
Stocks in Focus Friday
- Shares of Regeneron Pharmaceuticals Inc. rose Friday after the company said its COVID-19 antibody cocktail treatment generated $145.5 million in sales in the fourth quarter of 2020 as part of its earnings. Regeneron closed trading at $ 498.98.
- Shares of Johnson & Johnson gained 1.5%, closing at $164.45 after the FDA said it will meet on Feb. 26 to discuss JNJ’ Covid-19 candidate;
- Estee Lauder Companies reported a fiscal second-quarter profit that was well above expectations, as revenue also rose above forecasts, but provided a downbeat outlook for the current quarter as a resurgence in COVID-19 has led to renewed government restrictions. Shares rose 7.8%, closing at $272.81;
- Ford Motor reported an unexpected fourth-quarter profit. Shares rose 1.2%, closing at $11.51.
- Peloton Interactive Inc. notched its first-ever quarter with revenue above $1 billion but was weighed delays in shipping of its products. Shares closed nearly 6% lower, closing at $148.30
How did the European markets perform?
- European stocks closed mixed Friday as investors looked to vaccine rollouts for hopes of normalization, while global markets flirted with record highs.
- The pan-European STOXX 600 Index posted its best weekly performance since November with a rise of 3.5% despite a lackluster session on Friday, when gains in travel and leisure stocks, basic materials, and banks were countered by losses in defensive sectors such as utilities, telecoms, and healthcare.
- Germany’s DAX index was flat after data showed orders for German-made goods fell more than expected in December, ending a seven-month streak of positive reports as fresh restrictions to contain the COVID-19 pandemic subdued demand from other eurozone countries. London’s FTSE 100 slid 0.2%, extending losses to a third straight session, as a higher pound weighed on the internationally-focused firms on the index. France’s CAC 40 rose 0.9% to close at a two-week high.
- Investors also parsed earnings reports from European companies including BNP Paribas, Sanofi, Intesa Sanpaolo, and Thyssenkrupp which reported on Friday.
- Sanofi SA gained 1.5% as the French drugmaker said it aimed to grow earnings per share this year after posting stronger-than-expected quarterly results. But shares in Vinci were the biggest boost to the STOXX 600 after Europe’s biggest construction and concessions company beat full-year core profit forecasts, helped by some recovery in its contracting business. Insurer Beazley logged its best day in eight weeks as a loss in 2020 took a back seat to a forecast to return to profit and bring back its dividend during this year.
- At the bottom of the European blue-chip index, Finnish engineering firm Neste fell 6% after its fourth-quarter earnings report.
How did Asian markets perform?
- Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 1.54% and the Hang Seng rose 0.63%. The Shanghai Composite lost 0.16%.
- Shares of Aurora Mobile Ltd. surged 37% Friday after the China-based mobile developer service provider announced a partnership agreement with Kuaishou Technology, the TikTok rival backed by China-based technology giant Tencent Holdings Ltd., to improve advertising monetization efficiency.
Commodities and other assets
- Gold futures rose $21.80, or 1.2%, to settle at $1,813 an ounce while oil futures gained with the U.S benchmark gaining 62 cents, or 1.1%, to settle at $56.85 a barrel on the New York Mercantile Exchange.
- The yield on the 10-year Treasury note rose 2.5 basis points to about 1.172%, from 1.090% last Friday.
- The dollar lost out to the euro after Friday’s U.S. jobs report suggested that some traders may have over-played a stronger American recovery from the coronavirus pandemic.
- The ICE USD Index, a measure of the currency against a basket of six major rivals, was down 0.6%, after being up by nearly 0.5% so far this week.
- The euro rose 0.7% to $1.2042 in its biggest daily gain in
- Investors will digest a range of corporate earnings including from Cisco, Twitter, Coca-Cola, General Motors, PepsiCo, and Disney.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.