U.S. Stocks Extend Uptrend In Reaction To Monthly Jobs Data

Stocks moved mostly higher during trading on Friday, extending the upward trend seen over the past several sessions. With the continued advance, the Nasdaq and the S&P 500 once again reached new record closing highs.

The major averages all finished the day moderately higher. The Dow rose 92.38 points or 0.3 percent to 31,148.24, the Nasdaq advanced 78.55 points or 0.6 percent to 13,856.30 and the S&P 500 climbed 15.09 points or 0.4 percent to 3,886.83.

Following the steep drop seen last week, the major averages all moved sharply higher for this week. The Dow surged up by 3.9 percent, the S&P 500 spiked by 4.6 percent and the Nasdaq soared by 6 percent.

The continued strength on Wall Street came after the Labor Department report released a closely watched report showing 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 unexpected drop in the unemployment rate came as household employment rose by a solid 381,000 persons compared with a 206,000-person decrease in the size of labor force.

Despite the decrease, Andrew Hunter, Senior US Economist at Capital Economics, said the relatively high unemployment rate “suggests there is still some way to go in the labor market recovery.”

“But, as the vaccine rollout allows the economy to reopen and demand is given an additional lift from continued fiscal support, we expect the unemployment rate to reach 4.5% by the end of this year,” Hunter said.

The markets continued to benefit from upbeat news on the earnings front, with Ford (F), Estée Lauder (EL), Activision Blizzard (ATVI) and Gilead Sciences (GILD) all moving higher after reporting their quarterly results.

Buying interest was also 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.

Sector News

Gold stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Gold Bugs Index up by 2.7 percent.

The rally by gold stocks came amid a significant rebound by the price of the precious metal, with gold for April delivery jumping $21.80 to $1,813 an ounce.

Considerable strength was also visible among steel stocks, as reflected by the 2.1 percent jump by the NYSE Arca Steel Index.

Housing stocks also turned in a strong performance on the day, resulting in a 2 percent advance by the Philadelphia Housing Sector Index.

Networking, biotechnology and chemical stocks also saw notable strength, while some weakness was visible among semiconductor and airline stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index spiked by 1.5 percent, while Hong Kong’s Hang Seng Index climbed by 0.6 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index advanced by 0.8 percent, the German DAX Index closed just below the unchanged line and the U.K.’s FTSE 100 Index edged down by 0.2 percent.

In the bond market, treasuries closed firmly negative after seeing considerable volatility in early trading. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 1.170 percent.

Looking Ahead

The economic calendar for next week is relatively quiet, although traders are likely to keep an eye on reports on weekly jobless claims, consumer prices and consumer sentiment along with a speech by Federal Reserve Chair Jerome Powell.

On the earnings front, Hasbro (HAS), DuPont (DD), Cisco (CSCO), Lyft (LYFT), Mattel (MAT), Twitter (TWTR), Coca-Cola (KO), General Motors (GM), Uber (UBER), Kellogg (K), Kraft Heinz (KHC), PepsiCo (PEP), and Disney (DIS) are among the companies releasing their quarterly results next week.