Dow falls over 200 points as investors return from Labor Day

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MARKET SNAPSHOT

Major U.S. stock indexes traded mostly lower, though the Nasdaq Composite marched edged further into record territory, as investors returned from a three-day holiday weekend unsure about the toll the delta variant of the coronavirus will take on the economic outlook.

How are stock benchmarks trading?

  • The Dow Jones Industrial Average fell 244 points, or 0.7%, to 35,124.
  • The S&P 500 was down 15 points, or 0.3%, at 4,521.
  • The Nasdaq Composite ticked up 13 points, or less than 0.1%, to 15,377.

The tech-heavy Nasdaq Composite ended at a record on Friday, and gained 1.6% last week. The S&P 500 and the Dow industrials finished the week within touching distances of all-time highs. U.S. markets were closed Monday for Labor Day.

What’s driving the market

Analysts were discussing the implications of the disappointing August payrolls report released Friday by the Labor Department, which showed 235,000 nonfarm jobs created.

Analysts at BCA Research pointed out that while no leisure and hospitality jobs were created last month, wages rose — an indicator that the delta wave of COVID-19 infections is the primary cause for the jobs disappointment, and not a shift in the industry’s hiring needs.

“We expect strong job growth in the months ahead as supply-side labor constraints are removed and infections rates ease. This implies that the Fed will continue to prepare for the normalization of monetary policy, starting with a taper announcement later this year,” they said.

Strategists at Barclays lifted their year-end S&P 500 price target to 4,600 from 4,400. “We do not believe that the start of the taper will lead to a significant market selloff,” the Barclays strategists said.

See: Taper your pessimism — Fed’s actions won’t derail U.S. stocks, Barclays strategists say

Meanwhile, investors continue to weigh the implications of the spread of the delta variant of the coronavirus that causes COVID-19.

It is among the more disorienting Labor Day weekends in a while as many office workers are still working from home, the fall’s travel plans remain on hold and the goalposts on a return to the ‘new normal’ have been moved once again,” said Christopher Smart, chief global strategist and head of the Barings Investment Institute, in emailed remarks.

But overall, evidence indicates the economy remains relatively resilient, with the recovery “delayed but not derailed,” he said.

“With further recovery still ahead for lagging pockets of the global economy and policy makers fully aware of the perils of premature tightening, the next 12-18 months should be a period of good returns in equities, private assets and emerging markets,” he said.

Which companies are in focus?

  • State Street Corp. announced Tuesday that it had entered an agreement to acquire Brown Brothers Harriman’s Investor Services business for $3.5 billion in cash. The deal includes BBH’s custody, accounting, fund administration, global markets and technology services, and is expected to close by year-end. State Street shares fell 3.5%.
  • Shares of Boeing Co. were down 2.5%. Ryanair Holdings PLC said Monday that its negotiations with the company over an order for the Boeing 737 MAX 10 aircraft had ended as an agreement on pricing couldn’t be reached.

How are other assets faring?

  • The yield on the 10-year U.S. Treasury note rose 4.9 basis points to 1.373%. Yields move in the opposite direction of prices.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, rose 0.5%.
  • Oil futures were under pressure, with the U.S. benchmark down 1.4% at $68.31 a barrel on the New York Mercantile Exchange Gold futures were also lower, down 1.9% at $1,799.70 an ounce.
  • European equities were slightly lower, with the Stoxx Europe 600 and the FTSE 100 each down 0.5%.
  • In Asia, the Shanghai Composite rose 1.5%, while the Hang Seng Index rose 0.7% and Japan’s Nikkei 225 advanced 0.9%.

Video: Markets impacted by August jobs report sparking stagflation concerns (CNBC)

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