Stocks rose to record levels on the heels of a key labor market report, which reflected a stronger-than-expected rebound in employment last month and a marked drop in the jobless rate.
The S&P 500 logged record closing and intraday highs, extending record-setting gains from a day earlier. The Dow added more than 100 points, or 0.4%, and also set a record high. The Nasdaq dipped as Treasury yields gained across the curve after the better-than-expected print on the labor market’s recovery.
For investors, all eyes on Friday were fixed on the Labor Department’s July jobs report. The print showed a whopping 943,000 jobs came back last month as the unemployment rate fell to the lowest level since March 2020. The report also showed upward revisions to the past two months’ payroll gains.
But with the Delta variant running rampant across the U.S. and other constraints to the labor market still at play, many pundits have suggested the economy is not fully in the clear yet. Just earlier this week, ADP’s closely watched print on private payrolls registered as a sharp disappointment, with only 330,000 jobs coming back versus the nearly 700,000 expected. While the ADP report has historically not tracked perfectly with the Labor Department’s “official” monthly jobs reports, it has tended to be a good directional indicator of trends in the labor market.
And for equity investors, some moderation in the pace of the recovery may be perceived as the more desirable outcome.
“The market actually wants a bad jobs report, perverse as that sounds,” Opimas CEO Octavio Marenzi, told Yahoo Finance Thursday afternoon, adding it wants “the job numbers to come in weak so the Fed has a reason to continue its monetary policy.”
Namely, the Federal Reserve has suggested it is looking for more progress in the economic recovery before moving to announce or actually implement changes to its highly accommodative policies. Earlier this week, Federal Reserve Governor Christopher Waller said that he would support announcing tapering of the central bank’s crisis-era bond purchases by September if the next couple jobs report come in strongly. Likewise, Federal Reserve Vice Chair Richard Clarida said he would back an interest rate increase in 2023 if the economic recovery continues on its current trajectory.
Other economists suggested this month’s jobs report would be only a backwards-looking indicator given the deceleration in growth occurring as a result of the latest wave of virus concerns.
“July is a seasonally bad time for state and local government employment as the school year ends but since the layoffs were front loaded, there is a chance the seasonal factor makes an outsize contribution for this area of public sector employment,” Neil Dutta, head of macro research at Renaissance Macro Research, wrote in an email on Thursday. “I think the broader story is that even if July is strong, it won’t matter because no one should expect a repeat performance in August with economic confidence waning due to the rise in COVID hospitalizations in parts of the country.”
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4:04 p.m. ET: S&P 500, Dow log record closing highs
Here’s where markets were trading by market close:
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S&P 500 (^GSPC): +7.42 (+0.17%) to 4,436.52
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Dow (^DJI): +144.26 (+0.41%) to 35,208.51
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Nasdaq (^IXIC): -59.36 (-0.4%) to 14,835.76
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Crude (CL=F): -$1.00 (-1.45%) to $68.09 a barrel
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Gold (GC=F): -$46.70 (-2.58%) to $1,762.20 per ounce
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10-year Treasury (^TNX): +8.7 bps to yield 1.304%
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3:49 p.m. ET: ‘The lack of a pullback is frustrating’: Strategist
Stocks hovered at record highs on Friday, extending a march higher that has continued virtually uninterrupted for months. The S&P 500 has not endured a 5% pullback since October, marking the longest period without such a drop since the time between mid-2016 and February 2018.
“The lack of a pullback is frustrating all sorts of experts, including me,” George Ball, Sanders Morris Harris chairman, told Yahoo Finance Live on Friday. “Valuations are comparably stretched, even though earnings have been excellent. And so the self-appointed experts would like to see stock prices pull back, because right now you have multiples of over 20x forward earnings, and even though the economy is doing well, there are a lot of risks out there.”
“I do think prices are going to head up on balance, for the time being until there’s a new variable beyond the things that are already priced into the market, which would be COVID, labor, the economy,” he added. “But something will pull it down at a point.”
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11:11 a.m. ET: What economists are saying about the July jobs report
The Labor Department’s “official” monthly jobs report topped expectations on virtually every major metric, with non-farm payrolls, the unemployment rate and labor force participation rate improving relative to June.
Here’s what a number of economists said about the print, based on notes and emails sent to Yahoo Finance:
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“Overall, a nice read on the labor market that is making further progress toward full recovery. There is still more work to be done to bringing people back in the workforce but we continue to see progress being made which helps to facilitate strong job growth. This should set the Fed up very nicely for taper announcement later this year.” – Bank of America U.S. economists Joseph Song and Michelle Meyer
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“The highly contagious delta variant casts a shadow on the labor market recovery in the coming months, threatening to slow the return of workers still on the sideline due to childcare issues or health concerns. But assuming the variant doesn’t force renewed containment measures, we maintain our positive labor market outlook for H2 and foresee the economy recouping over 7mn jobs this year.” – Kathy Bostjancic, chief U.S. financial economist for Oxford Economics
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“The growth is sustainable because the 1.881 million new workers this summer hired in June and July have paychecks to spend and keep the economy’s wheels spinning in the months to come. This is not a fluke, this is real.” – Chris Rupkey, chief economist for FWDBONDS
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“The stronger 943,000 rise in non-farm payrolls in July and upward revision to previous months’ gains indicates that employment growth has shifted into a higher gear and that the drag on hiring from labour shortages is easing. That suggests economic growth may be holding up better than we had feared and leaves open the possibility of Fed Chair Jerome Powell dropping a stronger hint that tapering is on the way at Jackson Hole in three weeks’ time.” – Andrew Hunter, senior U.S. economist for Capital Economics
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10:52 a.m. ET: The ‘No. 1 concern on investors’ minds’ right now: Wells Fargo strategist
Investors have been weighing optimism over a pick-up in economic activity against concerns that the economy might run too hot in the near-term. According to a number of strategists, that tug-of-war will continue to be the primary concern for investors.
“People are concerned about inflation and when do breaks eventually go up,” Ann Miletti, head of active equity for Wells Fargo Asset Management, told Yahoo Finance. “That’s probably the No. 1 concern on investors’ minds: Has the market gone too far? How expensive is the market? And where else can we put money to work?”
“As an equity investors, I think there still is room for investors to stay,” she added. “They have to stay positioned somewhat in equities just because there’s no other room to really earn good returns. And the economy is still strong, there’s still room to grow here.”
“The concern really is about 2022. We know growth will slow,” Miller said. “And I think the factors there are, what happens with the regulatory and policy environment for 2022. That’s where the concerns primarily lie for me. But there’s definitely room for the market to go.”
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9:30 a.m. ET: S&P 500 touches intraday record, Dow gains after jobs report
Here’s where markets began the trading day on Friday:
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S&P 500 (^GSPC): +8.49 (+0.19%) to 4,437.59
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Dow (^DJI): +151.48 (+0.43%) to 35,215.73
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Nasdaq (^IXIC): -24.06 (-0.16%) to 14,871.17
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Crude (CL=F): +$0.50 (+0.72%) to $69.59 a barrel
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Gold (GC=F): -$35.60 (-1.97%) to $1,773.30 per ounce
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10-year Treasury (^TNX): +6.8 bps to yield 1.285%
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9:15 a.m. ET: Job growth blows past estimates in July, with unemployment rate at lowest since March 2020
U.S. employers added back more jobs than expected in July as broader business reopenings helped stoke hiring.
Non-farm payrolls grew by 943,000 last month, exceeding estimates for about 870,000, according to Bloomberg data. Job gains for both May and June were also upwardly revised by a total of 119,000. Leisure and hospitality employers contributed heavily to the growth, with these industries adding back 380,000 last month.
The unemployment rate also improved more than expected to 5.4%, falling from 5.9% in June. Consensus economists were looking for a print of 5.7%.
Average hourly earnings were boosted more than anticipated on both a month-on-month and year-on-year basis, as employers tried to lure workers given widespread labor scarcities. Average hourly wages grew 0.4% in July over June, and by 4.0% compared to the same month last year.
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7:11 a.m. ET Friday: Stock futures trade mixed
Here’s where markets were trading Friday morning:
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S&P 500 futures (ES=F): +1.75 points (+0.04%) at 4,423.25
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Dow futures (YM=F): +25 points (+0.07%) to 34,968.00
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Nasdaq futures (NQ=F): -17.75 points (-0.12%) to 15,150.00
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Crude (CL=F): +$0.99 (+1.3%) to $69.99 a barrel
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Gold (GC=F): -$12.50 (-0.69%) to $1,796.40 per ounce
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10-year Treasury (^TNX): +4.1 bps to yield 1.258%
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6:10 p.m. ET Thursday: Stock futures hug the flat line before jobs report
Here’s where markets were trading Thursday evening:
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S&P 500 futures (ES=F): -1.75 points (-0.04%) at 4,419.75
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Dow futures (YM=F): -19 points (-0.05%) to 34,924.00
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Nasdaq futures (NQ=F): -2 points (-0.01%) to 15,165.75
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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