#Market Snapshot: U.S. stocks rise into record territory after jobs report

The U.S. bond market will close an hour early Friday and U.S. markets will remain closed on Monday in observance of the Independence Day or Fourth of July holiday which falls on a Sunday this year.

How are benchmarks trading?

• The Dow Jones Industrial Average
  DJIA,
  +0.41%
  was up 155.42 points, or 0.5%, at 34,788.95, pushing past its May 7 closing high of 34,777.76. The blue-chip gauge’s gains are checked by news of a leadership change at IBM and a report about a water land by a Boeing Co.
  BA,
  -0.71%
  cargo jet.

• The S&P 500 index
  SPX,
  +0.63%
  advanced 26.19 points, or 0.6%, to 4346.14, surpassing its intraday record high of 4,340.70 that was set at around midday.

• The Nasdaq Composite Index
  COMP,
  +0.65%
  traded up 88.81 points at 14,611.18, a rise of 0.6%. That beats an intraday all-time high of 14,607.83.

On Thursday, the S&P 500 marked its sixth record close in succession and its 34th of 2021, advancing 22.44 points, or 0.5%, ending at 4,319.94; the Dow rose 131.02 points, or 0.4%, to close at 34,633.53, within striking distance of its record close at 34,777.76 hit on May 7. The Nasdaq Composite gained 18.42 points, or 0.1%, finishing at 14,522.38.

For the week

The Dow was looking at a weekly gain of 1% to mark its second straight weekly rise; the S&P 500 was up 1.5% for what would also be its second consecutive weekly climb; and the Nasdaq Composite was on track to advance 1.8% in potentially its second straight weekly gain.

What’s driving the stock market?

The U.S. added 850,000 jobs in June, marking the biggest monthly gain since March, and jobs gains in May were raised slightly to 583,0000 from 559,000. Economists polled by The Wall Street Journal had estimated that the U.S. added 706,000 new jobs for June.

“Very strong gains in hospitality and leisure,” areas pummeled by the pandemic, signal that “we can achieve a much fuller recovery” in sectors that have been running at low capacity, or were partly closed, due to COVID-19 fears, said James McCann, deputy chief economist at Aberdeen Standard Investments, in an interview Friday. “You’re seeing the services sector really kick back in quite a powerful way.”

Yet progress in the labor market isn’t strong enough to stoke investor fears that the Federal Reserve will have to begin tapering its quantitative easing program or raising rates faster than anticipated, according to McCann. Even with the “healthy pace” of recovery from the COVID-19 crisis, the job market still has “a lot of spare capacity.”

Unemployment rose to 5.9% in June from 5.8% in May. That’s “largely due to the return of workers to the labor force,” according to an emailed statement by Rick Rieder, BlackRock’s chief investment officer of global fixed income and head of the asset management giant’s global allocation investment team.

“Even with a strong headline gain in payrolls of 850,000 jobs, today’s employment report is more about whether employers have found enough people to fulfill the increasingly, and historically, large job openings,” Rieder said. “The ratio of job openings/unemployed is nearing pre-pandemic highs, and the ratio of quits/layoffs has vaulted to multi-decade highs.”

Meanwhile, U.S. average hourly earnings climbed 10 cents in June to $30.40, and the U.S. workweek fell 0.1 hours to 34.7 hours last month, the jobs report shows.

“The average workweek shrank and the participation rate held steady, which show that the recovery remains slow and uneven,” Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, wrote in emailed comments.

The labor-force participation rate, reflecting the share of able-bodied people 16 or older who were in the labor force, stood at 61.6% in June—the same as it was last October.

Other analysts billed the results from the closely followed employment report as reflecting progress but far from the degree of recovery needed from the downturn that occurred during the height of the economic hit from the pandemic in the U.S.

Daniel Vernazza, chief international economist, at UniCredit estimated that, adjusting for workers who incorrectly classified themselves as “unemployed but not at work,” the unemployment rate is closer to 8.9%, “well above the pre-COVID level of 3.5%.”

“The Fed is likely to judge – rightly – that it has made progress towards its maximum
employment goal, but not the ‘substantial further progress’ it has set before tapering the pace of asset purchases,” Vernazza wrote.

Investors have been focused on jobs because despite evidence that inflation is heating up in the recovery from the pandemic, the jobs recovery hasn’t instilled confidence in market participants.

The number of people quitting their jobs recently has hit a record. There is also been a big flush of retirements among older people who don’t want to risk their health.

Jefferies economists Aneta Markowska and Thomas Simons wrote that although the labor report was strong it is “still short of the 1 mln pace which was viewed as the base case just a few months ago.”

However, the economists at Jefferies expect to get to around 1 million jobs per month by July, “given the expiration of unemployment benefits in 25 states and very favorable seasonals.”

Outside of the jobs data, a report on international trade in goods and services for May showed a deficit of $72.1 billion expected, slightly higher than had been expected and higher than the $68.9 billion deficit in April. 

A reading on factory orders for May showed a 1.7% rise, after a revised 0.1% decline in the prior month, the Commerce Department said Friday, a little better than expectations. Factory orders have risen in 12 of the last 13 months.

Meanwhile, the oil market is also in focus on Friday as Organization of the Petroleum Exporting Countries and a Russia— members of the group known as OPEC+—delayed a decision about easing output curbs that have been in place to help stabilize crude prices.

The oil decision comes as the group is contending with the after effects of the COVID pandemic on energy demand and concerns about the impact of variants of the coronavirus in parts of the world against expectations for higher demand as many economies emerge from lockdowns and stay-at-home protocols put in place to limit the pandemic’s spread.

Investors may keep on eye on talks surrounding the U.S.’s debt ceiling also, amid reports suggesting that Congress has no plans to raise it.

Which companies are in focus?

• International Business Machines Corp.
  IBM,
  -4.47%
  President Jim Whitehurst is stepping down after three years at the tech giant, coming after Chief Executive Officer Arvind Krishna took the reins at the company last year. Whitehurst was the former CEO of RedHat, which IBM bought two years ago. Shares were down 4.4%.

• A Boeing Co. cargo plane made an emergency landing in the Pacific Ocean off the coast of Hawaii early Friday and both people on board have been rescued, the Federal Aviation Administration said in a statement. Its stock was down 0.7%.

• Shares of Chinese ride-sharing company Didi Global Inc. DIDI fell 7.7% after China’s internet regulator said it is investigating the company’s cybersecurity risks, Dow Jones Newswires reported.

• Tesla Inc. TSLA announced Friday that it produced 206,421 vehicles and delivered 201,250, just below FactSet expectations for 207,000 vehicle sales. Shares were up 0.4%.

• Shares of Virgin Galactic
  SPCE,
  +3.01%
  were up 5.7% after the space tourism venture announced it will take Sir Richard Branson, one of its founders into space.

• Shares of donut chain Krispy Kreme
  DNUT,
  -8.77%
   were down 9% after the company closed its first trading day up 24%.

• Brokerage firm Robinhood Markets
  HOOD,
  
  made public its plans to list on the Nasdaq Inc. exchange under the ticker “HOOD.”

How are other assets faring?

• The yield on the 10-year Treasury note TMUBMUSD10Y slipped 1.7 basis points to 1.438%. Yields and debt prices move in opposite directions.

• The ICE U.S. Dollar Index DXY, a measure of the currency against at basket of six major rivals, was down 0.3%.

• The U.S. oil benchmark CL00, was trading almost 0.1% lower at $75.18 a barrel as investors awaited a delayed decision by OPEC+ on whether to further boost production beginning next month. Gold futures GCQ21 were trading or 0.4% higher at $1,784.40 an ounce, heading for its highest settlement since June 16.

• In European equities, the Stoxx 600 Europe SXXP closed 0.3% higher and booked a 0.2% weekly decline, and London’s FTSE 100 UKX slipped less than 0.1% and declined 0.2% for the week.

• In Asia, the Shanghai Composite SHCOMP tumbled 2% and lost 2.5% on the week, while Japan’s Nikkei 225 NIK rose 0.3% on the day but declined 1% on the week.