Positive Reaction To Jobs Report May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to extend their recent upward trend following the release of the Labor Department’s closely watched monthly jobs report.

Stocks are likely to add to their recent gains after the Labor Department report showed a modest rebound in employment in the month of January.

The report said non-farm payroll employment edged up by 49,000 jobs in January after plunging by a revised 227,000 jobs in December.

Economists had expected employment to rise by about 50,000 jobs following the loss of 140,000 jobs originally reported for the previous month.

Traders may see the uptick in employment as a goldilocks situation, as the modest increase offsets concerns of a prolonged slump but also suggests the economy could benefit from more fiscal stimulus.

The Labor Department also said the unemployment rate slid to 6.3 percent in January from 6.7 percent in December. The unemployment rate was expected to come in unchanged.

The markets may also benefit from more upbeat news on the earnings front, with Ford (F), Estée Lauder (EL), Regeneron (REGN) and Gilead Sciences (GILD) seeing pre-market strength after reporting their quarterly results.

Buying interest could also be generated in reaction to news that Johnson & Johnson (JNJ) has applied for an emergency use authorization from the FDA for its single-dose coronavirus vaccine.

Stocks showed a strong move to the upside during trading on Thursday, extending the rally seen earlier in the week. With the upward move on the day, the Nasdaq and the S&P 500 ended the session at new record closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow surged up 332.26 points or 1.1 percent to 31,055.86, the Nasdaq jumped 167.20 points or 1.2 percent to 13,777.74 and the S&P 500 shot up 41.57 points or 1.1 percent to 3,871.74.

The markets continued to benefit from the upward momentum seen on Monday and Tuesday, which helped stocks largely offset the steep losses posted last week.

Easing concerns about speculative trading have helped drive the markets higher along with mostly upbeat earnings news from big-name companies.

Positive sentiment was also generated in reaction to a report from the Labor Department showing a continued decline in first-time claims for U.S. unemployment benefits in the week ended January 30th.

The report said initial jobless claims fell to 779,000, a decrease of 33,000 from the previous week’s revised level of 812,000.

Economists had expected jobless claims to edge down to 830,000 from the 847,000 originally reported for the previous week.

Jobless claims dropped for the third straight week, falling to their lowest level since hitting 716,000 in the week ended November 28th.

On Friday, the Labor Department is scheduled to release its more closely watched report on the employment situation in the month of January.

Economists currently expect employment to rise by 50,000 jobs in January after slumping by 140,000 jobs in December. The unemployment rate is expected to hold at 6.7 percent.

Traders have recently taken an optimistic view toward most economic data, seeing upbeat data as a positive for the economy while seeing disappointing data as putting pressure on lawmakers to pass more stimulus.

Airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.6 percent to its best closing level since last February.

Substantial strength was also visible among banking stocks, as reflected by the 3.1 percent spike by the KBW Bank Index.

Tobacco stocks also showed a significant move to the upside on the day, resulting in a 2.4 percent jump by the NYSE Arca Tobacco Index.

Oil Service, computer hardware and telecom stocks also saw considerable strength, moving higher along with most of the other major sectors.

Meanwhile, gold stocks were among the few groups to buck the uptrend, resulting in a 1.9 percent slump by the NYSE Arca Gold Bugs Index. The weakness among gold stocks came amid a steep drop by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are rising $0.43 to $56.66 a barrel after climbing $0.54 to $56.23 a barrel on Thursday. Meanwhile, after plummeting $43.90 to $1,791.20 an ounce in the previous session, gold futures are jumping $12.30 to $1,803.50 an ounce.

On the currency front, the U.S. dollar is trading at 105.53 yen versus the 105.54 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1999 compared to yesterday’s $1.1964.

Asia

Asian stocks ended broadly higher on Friday as a continued decline in first-time claims for U.S. unemployment benefits spurred hopes of a faster economic recovery. Progress in the vaccine rollout and optimism about U.S. fiscal stimulus also underpinned sentiment.

Japanese shares ended sharply higher, with sentiment underpinned by upbeat earnings from domestic firms and U.S. stimulus hopes. The Nikkei 225 Index jumped 437.24 points, or 1.5 percent, to 28,779.19 while the broader Topix closed 1.4 percent higher at 1,890.95.

Automaker Mazda Motor surged 18.5 percent after cutting its loss forecast. Mitsubishi Motor climbed 8.1 percent and Nissan Motor added 7.5 percent.

NTT Data Corp. rallied 9.5 percent after a brokerage upgrade. Central Japan Railway and West Japan Railway gained 5-6 percent on economic recovery hopes.

Nidec, a maker of electric motors, rose 1.4 percent after it agreed to acquire Mitsubishi Heavy Industries Machine Tool Co. Ltd., a producer of equipment for automotive gears, from Mitsubishi Heavy Industries Ltd. for about 30 billion yen. Shares of the latter tumbled 3.7 percent.

On the economic front, the Ministry of Internal Affairs and Communications said that the average of household spending in Japan was down 0.6 percent year-on-year in December, coming in at 315,007 yen. That beat forecasts for a decline of 2.4 percent following the 1.1 percent increase in November.

Meanwhile, Chinese shares ended slightly lower as liquidity concerns continued to be a key market focus. The benchmark Shanghai Composite Index slipped 5.53 points, or 0.2 percent, to 3,496.33, while Hong Kong’s Hang Seng Index rose 175.18 points, or 0.6 percent, to 29,288.68.

Australian markets rallied to wrap up their best week since early November. The benchmark S&P/ASX 200 Index climbed 75 points, or 1.1 percent, to 6,840.50, marking its strongest close since late February last year. The index jumped 3.5 percent for the week. The broader All Ordinaries Index gained 75 points, or 1.1 percent, to finish at 7,112.90.

The big four banks rose around 2 percent, while fund manager Magellan surged 5.8 percent after a broker upgrade.

News Corp. soared 13.2 percent as the media giant delivered its best quarterly result in at least seven years. Oil Search, Santos and Woodside Petroleum gained 1-2 percent after crude oil prices hit a fresh 12-month high.

Miner South32 fell 2.9 percent after a life extension for a coking coal mine in the Illawarra region was rejected by NSW’s independent planning commission.

In economic news, the Australian Bureau of Statistics said that the total value of retail sales in Australia was down a seasonally adjusted 4.1 percent month-on-month in December, coming in at A$30.368 billion. That follows the 7.1 percent spike in November.

Seoul stocks rebounded as signs of recovery from the pandemic boosted foreign buying of local stocks. The benchmark Kospi surged up 33.08 points, or 1.1 percent, to 3,120.63, led by financial and chemical shares.

Samsung SDI jumped 3.8 percent, LG Chem climbed 2.8 percent, SK Hynix advanced 2 percent and Samsung Electronics rose 1.2 percent.

In economic news, South Korea posted a current account surplus of $11.51 billion in December, the Bank of Korea said, up from $8.97 billion in November.

Europe

European stocks have advanced on Friday, with upbeat U.S. economic data released overnight and the prospect of further fiscal stimulus helping underpin sentiment. The upside has been capped by weak regional data released this morning.

German factory orders were down 1.9 percent month-on-month in December, reversing a 2.7 percent rise in November, data from Destatis revealed.

U.K. house prices fell 0.3 percent in January from a month earlier as the market appeared to lose momentum following a stimulus-fueled surge last year, mortgage lender Halifax said.

While the French CAC 40 Index has surged up by 1.1 percent, the German DAX Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Vinci has surged higher. After posting disappointing 2020 results, the French construction and infrastructure company said it expects contracting business to achieve growth in business levels and earnings.

Pharmaceutical company Sanofi has also moved to the upside after reporting stronger than expected results for the fourth quarter.

BNP Paribas has also risen on the day after the lender reported a smaller than expected drop in fourth-quarter profit.

Carlsberg has also jumped. The Copenhagen-based brewer proposed a bigger payout for shareholders after posting a forecast-beating full-year net profit.

Beazley shares have soared. After plunging to an annual loss, the British insurance company said it was confident of returning to profit in 2021.

Meanwhile, Aurubis AG shares have fallen. The non-ferrous metals provider backed its FY21 EBT view after reporting a rise in first-quarter consolidated net income.

Signature Aviation has also moved lower. The former owner of London’s Gatwick Airport has joined forces with Blackstone and Bill Gates’ Cascade to bid for the aviation company.

U.S. Economic Reports

Employment in the U.S. saw a modest increase in the month of January, according to a closely watched report released by the Labor Department on Friday.

The report said non-farm payroll employment edged up by 49,000 jobs in January after plunging by a revised 227,000 jobs in December.

Economists had expected employment to rise by about 50,000 jobs following the loss of 140,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate slid to 6.3 percent in January from 6.7 percent in December. The unemployment rate was expected to come in unchanged.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed in the month of December, as the value of exports jumped by more than the value of imports.

The Commerce Department said the trade deficit narrowed to $66.6 billion in December from a revised $69.0 billion in November.

Economists had expected the trade deficit to shrink to $65.7 billion from the $68.1 billion originally reported for the previous month.

The narrower deficit came as the value of exports surged up by 3.4 percent to $190.0 billion, while the value of imports increased by 1.5 percent to $256.6 billion.

At 3 pm ET, the Federal Reserve is scheduled to release its report on consumer credit in the month of December. Consumer credit is expected to increase by $12.0 billion.

Stocks In Focus

Shares of Pinterest (PINS) are soaring in pre-market trading after the image sharing and social media service reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Video game company Activision Blizzard (ATVI) also seeing significant pre-market strength after reported better than expected fourth quarter results and providing upbeat sales guidance.

On the other hand, shares of Skechers (SKX) are likely to see initial weakness after the footwear company reported fourth quarter earnings that missed analyst estimates.

Snapchat parent Snap (SNAP) may also come under pressure after reporting better than expected fourth quarter results but warning Apple’s (AAPL) upcoming privacy changes could hurt its ad business.