S&P, Nasdaq, Dow recover ground after jobs report-inspired fall
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U.S. stocks had made a late upward push on Friday, helped by gains in material and industrial stocks. Investors appeared to look past the pessimism inspired by the stronger than anticipated November jobs report.
With less than an hour of trading left, the Nasdaq Composite (COMP.IND) had pared most of its losses and was now down 0.21% to 11,457.79 points. The tech-heavy index was still some ways off its 100-day moving average, a key technical level.
The benchmark S&P 500 (SP500) had also cut its losses and was now 0.08% lower at 4,073.23 points. A jump in shares of Boeing (BA) on a report of sales of its 787 Dreamliners to United Airlines (UAL) boosted the Dow (DJI) and helped the blue-chip index climb into positive territory. It was 0.10% higher at 34,430.60 points.
Of the 11 S&P sectors, six were now trading in the red, with Energy and Technology leading the losses. Materials and Industrials added the most among gainers.
Nonfarm payrolls added by 263K, much higher than the expected 200K, while the unemployment rate remained unchanged. Furthermore, average hourly earnings rose 0.6%, double forecasts, putting pressure back on the Fed to remain vigilant on wage pressure and tight conditions.
"The most concerning aspect of the payroll report this morning was the update on wages," Matt Peron, director of research at Janus Henderson Investors, told Seeking Alpha.
"Wages held surprisingly firm, which has confirmed a recent trend. Unfortunately, this is a step back in an otherwise improving inflation story. This will be concerning to markets and while we are on a better path than a few months ago, we are not out of the woods yet. Policy will likely continue to be restrictive near-term and the more it stays restrictive, the more pressure on earnings next year," Peron added.
Rates had climbed sharply in the initial reaction to the jobs report, but had since pared their gains through the session. The 10-year Treasury yield (US10Y) had reversed course was now down 3 basis points to 3.50%. The 2-year yield (US2Y) rose 3 basis points to 4.28%. Meanwhile, the dollar index (DXY) seesawed. It was now down 0.18% at 104.53.
The stronger than expected jobs data puts a further damper on the euphoria experienced in Wednesday's stocks rally following Federal Reserve chief Jerome Powell's comments on slowing the pace of rate hikes. All three major indices had ended mixed in the previous day's session after the Powell-inspired surge, partly due to weak manufacturing data.
"After the massive surge on Wednesday following Fed Chair Powell's speech, the rally in risk assets stalled out yesterday thanks to weak US data that sparked growing concern about the state of the economy," Deutsche Bank's Henry Allen said.
"There were lots of releases to digest, but in many ways the most notable was the ISM manufacturing print, which fell into contractionary territory for the first time since May 2020," Allen added.
On the Fed front today, Chicago Fed President Charles Evans and Richmond Fed President Tom Barkin spoke before the quiet period starts.
Among active stocks, semiconductor company Marvell Technology (MRVL) fell after weak results and guidance. Cybersecurity firm Zscaler (ZS) declined despite a beat-and-raise quarter.
Horizon Therapeutics (HZNP) advanced amid ongoing buyout related news. Rigel (RIGL) soared on a FDA approval of a blood cancer drug.