Friday August 7th

7-08-2020

Stock futures cut losses after stronger-than-expected U.S. jobs report

U.S. stock index futures trimmed their earlier losses on Friday after the release of much stronger-than-forecast U.S. jobs data.  Dow Jones Industrial Average futures traded 23 points higher, or 0.1%, after being down more than 100 points earlier in the session. S&P 500 futures retraced their losses to traded just below the flatline while Nasdaq 100 futures were down only 0.1%. The U.S. economy added 1.763 million jobs in July, the Labor Department said Friday. Economists polled by Dow Jones expected a gain of 1.4 million. The U.S. unemployment rate was also better than expected, falling to 10.2%. The jobs reports for June and May were also revised sharply higher. Seema Shah, chief strategist at Principal Global Investors, said the report is a welcomed surprise for investors as “expectations of a negative jobs print had been hanging over investors for the past month.” However, Shah added Friday’s number does not “imply economic conditions are significantly improved.” “It simply suggests the labor market was static in July, showing no signs of renewed weakness that the increase in COVID-19 cases had threatened,” she said. “Nonetheless, with Congress failing to agree on a new fiscal stimulus package yet, the risk is that a policy failure drains the tentative strength that had been creeping back into the economy in recent months.” To be sure, market sentiment remained in check after President Donald Trump on Thursday issued executive orders to address “the threat posed” by Chinese apps TikTok and WeChat. As part of the order, any transaction with ByteDance and Tencent, the parent companies of TikTok and WeChat, respectively, will be barred in 45 days. It comes as tensions between Washington and Beijing continue to escalate over several issues including the origins of the coronavirus and democracy in Hong Kong. Meanwhile, the White House struggle to agree on a new stimulus package after a $600 per week enhanced federal unemployment benefit expired at the end of July. The Trump administration has threatened to pull out of talks and try to address jobless benefits and the eviction moratorium by executive action if the sides fail to reach an agreement by Friday. Top lawmakers told CNBC Thursday that they expect a compromise to be hatched but big differences still remain. Talks between negotiators ended Thursday evening without a breakthrough in sight as discussions edged closer to the Trump administration’s Friday deadline for striking an agreement. White House officials criticized Democrats as uncompromising while Democrats argued that the GOP failed to appreciate the severity of the recession. “We’re still a considerable amount apart in terms of a compromise that could be signed into law,” White House chief of staff Mark Meadows said of the meetings. “We’re very far apart,” said Democratic House Speaker Nancy Pelosi. The stock market is coming off five consecutive days of gains as the technology sector built on its momentum. This week’s gains in the S&P 500 pushed the equity benchmark just 1.3% below its Feb. 19 record. The Nasdaq Composite also closed above 11,000 for the first time ever on Thursday. “These big round numbers are a nice reminder of just how strong this rally has been since the March lows,” said Ryan Detrick, chief investment strategist for LPL Financial. “When you look at how strong earnings and guidance have been from the group, you realize there’s a reason the Nasdaq is at 11,000 and why eventual continued strength is quite likely.” Stocks in Asia Pacific were mostly lower on Friday as tensions between Beijing and Washington weighed on investor sentiment. Hong Kong’s Hang Seng index led losses among the region’s major markets, dropping 1.6% to close at 24,531.62. Shares of Chinese tech firms listed in the city tumbled. Chinese tech juggernaut Tencent plunged 5.04% while Semiconductor Manufacturing International Corporation’s stock in Hong Kong dropped 8.7%. Mainland Chinese stocks also declined on the day, with the Shanghai composite down 0.96% to approximately 3,354.04 while the Shenzhen component shed 1.548% to around 13,648.50. Elsewhere in the region, the moves were more muted. Japan’s Nikkei 225 slipped 0.39% to close at 22,329.94 while the Topix index shed 0.2% to end its trading day at 1,546.74. South Korea’s Kospi bucked the overall trend regionally as it closed 0.39% higher at 2,351.67. Oil dipped to around $45 a barrel on Friday on worries that a demand recovery would slow due to a resurgence of coronavirus cases, although a pledge from OPEC member Iraq to cut oil output further in August lent support. The resurgence of infections remains a key issue for the market and demand outlook. Tallies show cases in the United States are rising in a number of states. India reported on Friday a record daily jump in infections. Brent crude fell 27 cents, or 0.6%, to $44.82. U.S. West Texas Intermediate crude slipped 13 cents to $41.82. Gold’s record-breaking rally paused on Friday as the dollar got some respite from investors looking for a hedge against the U.S.-China spat, but fears over a worsening pandemic kept bullion on track for its longest streak of weekly gains in about a decade. Spot gold eased 0.2% to $2,058.55 per ounce, having scaled a record peak of $2,072.50 in early trade. It has added 4% so far this week in what would be its ninth straight weekly gain. U.S. gold futures were steady at $2,070.20.