Friday September 4th

4-09-2020

Dow futures are up 200 points after unemployment rate falls more than expected

U.S. stock index futures jumped on Friday after the release of U.S. employment data for August. Dow futures traded 200 points higher, or 0.7%. S&P 500 futures were up by 0.3%. The U.S. unemployment rate fell to 8.4% last month from 10.2% in July. Economists polled by Dow Jones expected the rate to decline to 9.8%. As for overall jobs creation, employment in the U.S. grew by 1.37 million in August, topping an estimate of 1.32 million. Bank stocks rose following the data release as Treasury yields climbed. Citigroup, Bank of America and JPMorgan Chase were all up at least 2%. Wells Fargo climbed 1.9%. The benchmark 10-year Treasury yield rose to 0.66%. The 30-year bond rate advanced to 1.4%. However, gains were capped as tech stocks remained under pressure. In premarket trading Friday, Apple was lower by 2.5%. Tesla, which plunged 9% on Thursday, fell by 5% in the premarket. Facebook, Amazon and Netflix were also in the red in early trading. Nasdaq 100 futures dropped 0.6%. The Dow slid more than 800 points, or 2.8%, on Thursday for its biggest one-day decline since June. The S&P 500 plunged 3.5% and the Nasdaq Composite dropped 5%. Thursday’s declines also wiped out the major averages’ gains for the week and knocked both the S&P 500 and Nasdaq off record levels. As a sector, tech had its worst day since March, falling 5.83%. Apple contributed a big portion of those losses, falling 8%. Facebook, Amazon, Netflix, Alphabet and Microsoft also closed Thursday’s session sharply lower. The steep declines in tech shares come after the space drove the lion’s share of the broader market’s comeback off the coronavirus sell-off lows. Since March 23, the S&P 500 tech sector is up about 70%. For the year, tech has rallied more than 30%. However, some investors have raised concern about the heavy concentration of gains in just a few stocks as it could make the broader market susceptible to a pullback if those names were ever in trouble. “We’ve had excessive valuations in the markets lately — particularly in the tech sector — and that needed to be corrected to some degree,” said Scott Knapp, chief market strategist at CUNA Mutual Group. “One needs to look no further than the recent irrational run-up in Tesla and Apple share prices after both companies announced a stock split to see overexuberance, especially among retail investors.” Both Tesla and Apple rallied recently after announcing stock splits. Dow futures were stronger as investors bid higher plays on the reopening of the economy. Shares of Boeing, airlines and cruise lines were higher in the premarket. Bank stocks like Citigroup and Morgan Stanley were also higher in premarket trading. Asia-Pacific stocks were lower on Friday, following Wall Street’s sharp declines overnight. Mainland Chinese stocks also closed lower. The Shanghai composite dropped 0.87% to approximately 3,355.37 while the Shenzhen component declined 0.84% to about 13,656.66. Hong Kong’s Hang Seng index slipped 1.25% to end its trading day at 24,695.45. The Kospi in South Korea dropped 1.15% on the day to 2,368.25, while Japan’s Nikkei 225 declined 1.11% to close at 23,205.43 and the Topix index shed 0.9% to finish its trading day at 1,616.60. Oil held above $44 a barrel on Friday and was on course for its biggest weekly decline since June as weak demand figures added to concern over a slow recovery from the COVID-19 pandemic. A U.S. government report showed that domestic gasoline demand fell in the latest week. Middle distillates inventories at Asia’s oil hub Singapore have soared above a nine-year high, official data showed. Brent crude, the international benchmark, was up 28 cents, or 0.6%, at $44.35, heading for a 1.6% drop this week. West Texas Intermediate rose 18 cents, or 0.5%, to $41.55, set for its first weekly drop in five. Gold prices rose on Friday as a slightly weaker U.S. dollar and a pullback in global equities lifted demand for the safe-haven metal, while investors awaited the release of U.S. non-farm payrolls data for August. Spot gold was up 0.4% at $1,937.84 per ounce by 0102 GMT, after falling to a near one-week low on Thursday. Bullion has declined 1.5% so far this week. U.S. gold futures rose 0.2% to $1,942.20. The dollar index fell 0.1% against its rivals after rising to a near one-week high in the previous session, making gold less expensive for holders of other currencies.