Dow, S&P 500 trade at record highs Friday after better-than-expected jobs report

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The Dow and the S&P 500 index traded at record highs on Friday after better-than-expected monthly US jobs reports, as the economy recovers from the COVID-19 pandemic and a resurgent delta shake-up.

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What is happening?

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On Thursday, Dow Industrials rose 271.58 points, or 0.78%, to end at 35,064.25. The S&P 500 edged up 26.44 points, or 0.6%, to 4,429.10 and the Nasdaq Composite gained 114.58 points, or 0.8%, to 14,895.12, both of which set fresh closing records.

Opinion: S&P 500 Looks Strong – But These ‘Internals’ Are Too Little Positive

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What is driving the market?

Stock market investors leaning towards undervalued segments of the market, Financial XLF,
+1.94%,
Energy XLE,
+1.30%
and content share xlb,
+1.33%
The US Labor Department’s employment report for July showed the US economy added 943,000 new jobs in July, higher than the forecast of 845,000, a Wall Street Journal poll of economists shows. The gains are higher than those seen in June and provide some hope that the stalled job recovery is gaining some steam.

The unemployment rate fell from 5.9% to 5.4%, which also exceeded expectations of a decline of 5.7%.

The July jobs figures come as businesses struggle with back-to-work plans due to the rapid spread of the Delta variant, which is affecting the US and other countries around the world.

Matt Perrone, director of research at Janus Henderson Investors, said strong results could dampen expectations of strong quarterly earnings from US corporations for the rest of the year, which has so far been a strong second quarter.

“This bodes well for continued earnings strength in 2H21, which should support the market, especially for economically sensitive sectors that have been lagging as of late,” Perrone wrote in an emailed commentary on Friday.

However, the data could also encourage the Federal Reserve to roll back on adjustment measures that have helped stimulate economic growth and asset prices.

Naeem Aslam, chief market analyst at AvaTrade, wrote in a note after the non-agriculture payroll numbers again turning the drum a little hard and today we have a clear warning sign that overly lax monetary policy is soon going to leave town. has been.” -Payroll figures released.

In fact, many analysts took the report as crediting the Federal Reserve’s timeline for its quantitative-easing measures, or QE, or $120 million-per-month bond-buying program, which helped create tight financial conditions during the height of the economy. helped to reduce The turmoil of the pandemic back in March and April of 2020.

“We know the Fed was looking for substantial progress in labor market reforms and that’s exactly what we’ve been seeing in the last two reports,” Fiona Cincotta, senior financial markets analyst at Citi Index, wrote in the email comments.

“Today’s better-than-read forecast prompted bets that the Fed may ease support too soon,” Cincotta said.

James McCann, deputy chief economist at Aberdeen Standard Investments, called the jobs report “robust” in emailed comments and said, “It really solidifies the idea that the Fed is not shying away from providing advance notice of a tapering announcement.”

Investors have speculated that the US central bank may signal its intention to ease its asset-buying program by the end of this month at a monetary policy gathering in Jackson Hole in northwestern Wyoming.

See Not Delta but ‘All Alpha’: Economists react to ‘remarkably strong’ US jobs report in July

Earlier this week, Federal Reserve Vice President Richard Clarida said the terms for the first rate hike would be met “by the end of 2022”, making the first move in 2023. The Fed’s vice president said he sees the recent rise in inflation. “Temporary.” But he said the risks of high inflation outweigh the risks of low inflation.

In other economic news, the June reading for US wholesale goods rose 1.1%.

On the public health front, the US averages more than seven times as many new COVID cases a day as it did in early July, according to a New York Times tracker, most of which are in unvaccinated people.

The Associated Press reported that California will require COVID-19 vaccines for all healthcare workers by September 30. And New Jersey will require masks for K-12 students and school staff when the new year begins in a few weeks, Gov. Phil Murphy is set to announce on Friday as the state’s COVID-19 cases rise. grow, the AP reported.

Which stocks are in focus?

How are other markets doing?

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