Dow futures up 133 points as investors parse disappointing January jobs report

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U.S. stock indexes held close to record levels Friday morning, with the benchmarks on track for the best weekly gain since the November elections, even though the latest update on employment showed a relatively disappointing gain of 49,000 jobs in January, suggesting that the recovery in the labor market is stalling.

How are stock benchmarks performing?

On Thursday, the S&P 500 SPX, +1.09% notched its sixth record close of 2021, while the Nasdaq Composite Index COMP, +1.23% registered its 7th record of the year so far, and the Dow Jones Industrial Average DJIA, +1.08% finished just 0.4% off its all-time closing high. The small-capitalization focused The Russell 200 RUT RUT, +1.98%  climbed 1.8%, setting a record.

For the week, the Russell 2000 is set for a 6.2% weekly gain, the Nasdaq was aiming for a gain of about 5.4%, the S&P 500 index was on track for a 4.2% weekly advance, while the Dow was looking at a return of 3.6% over the period, as of Thursday’s close.

What’s driving the market?

The Labor Department’s employment situation report showed 49,000 jobs were added in January, while the unemployment rate fell to 6.3% from 6.7%.

The results affirm the view that the recovery in the jobs market is stalling out amid the COVID-19 pandemic that has slammed the U.S. economy. Some 10 million jobs that vanished in the early stages of the pandemic still haven’t returned.

“By looking at the US [nonfarm payrolls] data, it is clear that massive strength that we have seen previously in a lot of areas in no longer there,” wrote Naeem Aslam, chief market analyst at AvaTrade. “This means that the US lawmakers can push really hard for the next second stimulus package,” he wrote after the labor data was released.

The January report follows a reading from December showed that 140,000 jobs were lost, marking the first monthly decline in employment figures in about eight months when the COVID-19 pandemic first walloped the country.

The January report come as many states reimposed business restrictions at the end of last year to combat the pandemic and restaurants and hotels had to lay off workers, some for the second or third time.

The state of employment is likely to be even worse than the labor report for last month reflects, economists say. Several million people who dropped out of the labor force, bringing the unemployment rate lower, did so because they couldn’t find work and they aren’t counted in the main unemployment rate.

Still, investors appeared upbeat on the basis of healthy earnings from American corporations in the second-busiest week of fourth quarter reporting season results, along with prospects for Congress passing President Joe Biden’s $1.9 trillion coronavirus relief package, using a special reconciliation procedure.

The Senate early Friday approved a budget resolution, 51-to-50, that would allow for a fast tracking of the $1.9 trillion coronavirus relief plan.

Fears of a market correction that took hold of the market last week, inspired by a Reddit-led revolution of individual investors, has given way to fresh gains for stocks. The rally for the major benchmarks now puts them on track for their best weekly gains in about three months, FactSet data show.

“US markets extended their rebound for the fourth day in a row yesterday, as the recent fallout from last week’s Reddit inspired sell-off faded further,” wrote Mark Hewson, chief market analyst at CMC Markets, in a daily research note.

“Improvements in US economic data, along with the prospect of further fiscal stimulus, have helped underpin this week’s recovery raising expectations that the momentum shown in the January ISM reports can be sustained into the rest of the first quarter,” the analyst said.

December’s Institute for Supply Management manufacturing index reading was the highest in almost 2½ years and was close to a 16-year peak.

Meanwhile, Treasury Secretary Janet Yellen said regulators would ensure investor protection after a months long social-media campaign by individual investors to drive up the value of heavily shorted stocks like GameStop Inc. GME, -42.11%.

Popular trading app Robinhood Markets has removed the last of its trading limits on shares of GameStop and AMC Entertainment Holdings AMC, -20.96%, among others. The volatility in the market associated with the reaction to the retail trading frenzy has since died down significantly.

On the public-health front, Johnson & Johnson JNJ, +0.93%  applied for on an emergency use authorization of its single-shot COVID vaccine, which could result in Americans getting shots as early as March.

Meanwhile, COVID hospitalizations continued to fall, to 88,668 on Thursday, the lowest total since Nov. 24, according to the COVID Tracking Project. However, the number of deaths in the U.S. resulting from the coronavirus that causes COVID-19 spiked above 5,000 for the first time on Thursday, snapping a declining trend.

Which stocks are in focus?
  • Shares of Regeneron Pharmaceuticals Inc. REGN gained in premarket trading on Friday after the company said its COVID-19 antibody cocktail treatment generated $145.5 million in sales in the fourth quarter of 2020 as part of its earnings.
  • A Food and Drug Administration advisory committee is now scheduled to meet Feb. 26 for an all-day meeting to discuss Johnson & Johnson‘s JNJ COVID-19 vaccine candidate.
  • Estee Lauder Companies EL reported Friday a fiscal second-quarter profit that was well above expectations, as revenue also rose above forecasts, but provided a downbeat outlook for the current quarter as a resurgence in COVID-19 cases has led to renewed government restrictions.
  • Shares of Noble Midstream L.P. NBLX shot up in premarket trading Friday, after Chevron CorpCVS offered to buy the operator of midstream infrastructure assets, which is already majority owned by Chevron, in a deal that values Noble Midstream at about $1.13 billion.
  • China’s Luckin Coffee filed for Chapter 15 bankruptcy in New York, the company said in a statement on Friday. All of its coffee chains will remain open, said Luckin, in a statement.
  • Shares of Aurora Mobile Ltd. JG more than doubled toward a two-year high in active premarket trading Friday, after the China-based mobile developer service provider announced a partnership agreement with Kuaishou Technology, the TikTok rival backed by China-based technology giant Tencent Holdings Ltd. TCEHY, to improve advertising monetization efficiency.
  • News CorpNWS, NWSA said late Thursday that its fiscal second-quarter was the most profitable quarter since the company’s reorganization seven-plus years ago, even as quarterly revenue declined by 3% from the year-ago quarter.
  • Ford Motor  F, +1.52% turned in an unexpected fourth-quarter profit
  • Peloton Interactive Inc. PTON, +7.04% notched its first-ever quarter with revenue above $1 billion, but was weighed delays in shipping of its products.
How are other asset faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y rose 3.4 basis points to about 1.17%, from 1.090% last Friday. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index, DXY, a measure of the currency against a basket of six major rivals, was off 0.1%, but had been up by nearly 1% so far this week.
  • Gold futures GCJ21 edged higher by 0.2% to around $1,794.90 an ounce, after falling below $1,800 on Thursday.
  • Oil futures rose, with the U.S. benchmark CL.1 gaining 43 cents, or 0.8%, to $56.65 per barrel on the New York Mercantile Exchange.
  • The Stoxx 600 Europe index SXXP traded 0.2% higher, while London’s FTSE 100 UKX was trading flat.
  • In Asian trade on Friday, the Shanghai Composite SHCOMP ended 0.2% lower, Hong Kong’s Hang Seng Index HSI gained 0.6% and Japan’s Nikkei 225 NIK rose1.5%.