Market Snapshot: Dow squanders Friday’s opening gains as investors parse smallest monthly headline jobs number of 2021


U.S. stock were struggling to hold modest opening gains Friday morning, as investors parsed a weaker-than-expected November jobs report, in what has been a volatile week driven by news on the omicron coronavirus variant and hawkish comments from Federal Reserve Chairman Jerome Powell.

How are stock benchmarks trading?
  • The S&P 500 index SPX, -0.58% was down 18 points, or 0.4%, to reach 4,557, after hitting an intraday peak at 4,608.03.
  • The Dow Jones Industrial Average DJIA, -0.32% was trading 82 points, or 0.3%, lower at 34,548, but had hit 34,801, near Friday’s open.
  • The Nasdaq Composite Index COMP, -1.35% was trading 160 points, or 1%, lower at 15,230.

On Thursday, the Dow industrials rose 617.75 points, or 1.8%, to 34,639.79 — the best percentage gain since March 5, 2021 and the best point gain since Nov. 9, 2020. The S&P 500 index closed up 1.4% to 4,577.10, its best day since Oct. 14. The Nasdaq Composite added 0.8% to 15,381.32. All three indexes are reflecting a loss of under 1% for the week thus far.

The Russell 2000 index RUT, -0.55% gained 2.7% to finish at 2,206.33, a day after hitting its first correction since June 2020.

What’s driving the markets?

Markets were wrestling with the significance of a report that showed that a mere 210,000 new jobs were created in November, well below estimates from economists polled by The Wall Street Journal for a gain of 573,000 new jobs.

The lackluster headline numbers come even though businesses took more aggressive steps to hire people, and may highlight the challenges that the labor market may face in the recovery phase from the pandemic, especially as the spread of the omicron variant takes shape.

However, the report did have some strong points. The jobless rate fell to 4.2% from 4.6%, and touched a new pandemic low. Economists say the official rate likely underestimates the true level of unemployment by a few percentage points, however.

On top of that, some 594,000 people rejoined the labor force in November. The so-called rate of participation rose two ticks to 61.8%.

“The headline number of 210k vs 550k expected was a big miss and yet there is a lot of good news in the report despite that: the labor-force participation Rate increased, reflecting a greater share of the population has returned to the workforce, and the headline unemployment rate dropped to 4.2%, which reflects a robust labor market,” wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.  

The data have become even more important after the Federal Reserve Chairman Jerome Powell this week, who spoke of a strong economy and the prospect of a quicker taper, which could speed up interest-rate hikes.

“Markets have a lot to digest as the economy is strong, but the labor market is reaching its full potential and inflationary forces are already elevated, which is why the Fed is feeling more urgency to complete their tapering early and may need to raise interest rates more quickly than many people are expecting,” Zaccarelli wrote.

After several days of volatile action, major indexes logged positive closes for the first time in three sessions on Thursday. Gains were driven by hopes that the omicron variant of the coronavirus that causes COVID-19 will prove less deadly, even if more transmissible, and less disruptive for the global economy.

Investors learned of a second U.S. case of the omicron variant from a Minnesota resident visiting New York, who reportedly showed mild symptoms.

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Looking beyond jobs, IHS Markit’s final U.S. services purchasing managers index for November came in at 58 versus an initial reading of 57.

Investors are also watching for a report from the Institute for Supply Management’s services index for November, and one on October factory orders at 10 a.m. Eastern.

While markets bounced Thursday, volatility remains high, said Ipek Ozkardeskaya, senior analyst at Swissquote, in a note to clients.

“That’s a sign that the stress in the market is not over just yet, because the root cause of the latest market selloff is not only omicron, it’s also the fear of seeing the markets left with less Federal Reserve support due to Fed’s willingness to address the high inflation issue moving forward. And, that remains a major downside risk to the risky assets,” said Ozkardeskaya.

Shares of Chinese companies may be in focus on Friday, after Chinese ride-hailing giant Didi Global DIDI, -14.94% said late Thursday it will delist from the New York Stock Exchange, following pressure from the Chinese government. Shares of Didi rose 9% in premarket trading.

Among other assets, oil prices continued to rise, with West Texas Intermediate crude CL00, +3.14% up 3.4% to $68.83 a barrel, and global benchmark Brent BRN00, +3.40% rising 3% to $71.79 a barrel.

On Thursday, the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, decided to rollover their existing production policy and boost output at the start of next year, even amid concerns the omicron variant could hurt demand.

In politics, Congress’s passage of a short-term extension of government funding, through Feb. 18, which will be sent to President Biden’s desk, averts a partial shutdown after resolving a standoff over vaccine rules.

What companies are in focus?
How are other assets trading?

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