Day Traders Diary

8/6/21

The major averages tied to the economic recovery rose after a stronger-than-expected jobs report on Friday, sending two key market averages to all-time highs. The Dow Jones Industrial Average rose 144 points, or 04%, and closed at an all-time high. The S&P 500 inched up 7 points to clinch another record close, while the tech-heavy Nasdaq Composite fell 59 points or 0.4%.

Friday's jobs report showed that the U.S. economy added 943,000 jobs in July, according to the Labor Department. Economists expected the economy to have added 845,000 jobs last month, according to estimates from Dow Jones. The unemployment rate dropped to 5.4%, below the estimate of 5.7%.

Bank shares led the gains post-jobs report as rates shot higher, increasing their profitability prospects. Shares of JPMorgan and Bank of America rose almost 3%, while Wells Fargo climbed 3.8%. Shares of Goldman Sachs hit an all-time high, and regional bank stocks had their best day in nearly a month.

The 10-year Treasury yield, which has drifted lower over the summer, jumped to 1.3% on Friday. Yields move inverse to prices.

Industrials, retailers and energy stocks also gained as the jobs report soothed concerns about the economic comeback.

On the flip side, tech shares declined as the jump in rates caused investors to take profits in the names and move back into stocks that could benefit more from faster economic growth. Amazon and Apple dipped slightly, while Zoom Video fell more than 3%. Higher rates can expose tech stock lofty valuations.

Defensive stocks, such as utilities and health care companies, also slumped after the report.

Friday marked the latest in a string of record highs for the S&P 500, which has continued to grind higher this summer even as concerns have risen about peaking economic growth and the spread of the delta variant of Covid 19.

The Labor Department's report comes after the weekly initial claims number reported on Thursday came in at 385,000, which was in-line with expectations. However, the ADP private payrolls report on Wednesday showed a smaller-than-expected number of jobs added during July.

Wall Street was focused on Friday's jobs report given its potential to impact the Federal Reserve's policy going forward. Fed Governor Christopher Waller told CNBC on Monday that he would advocate for the central bank to taper its asset purchases if the next two jobs reports showed a healthy recovery.

A busy week of earnings continued on Friday with several notable reports, including from Canopy Growth, AMC Networks, Draftkings, Norwegian Cruise Line and Goodyear Tire. Shares of Expedia fell more than 7% after the travel company's earnings per share missed expectations in its quarterly report.

Additionally, Berkshire Hathaway is on deck for Saturday morning.

Through Thursday afternoon 427 S&P 500 components have posted quarterly results, with 88% topping earnings estimates, according to data from Refinitiv. When it comes to revenue, 87% have exceeded expectations.

Entering Friday, the Dow was up 0.4% for the week. The S&P and Nasdaq were up 0.77% and 1.5%, respectively.

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