The S&P 500 finished the week at new records on Friday, 6 August 2021, after the monthly US jobs report came in better than expected, and the numbers did not disappoint.
The US economy added 943,000 jobs in July, the highest in 11 months, which exceeded the 870,000 median estimate of economists surveyed by Bloomberg.
Another positive was the revision of June numbers from 850,000 to 938,000.
The unemployment rate fell to 5.4% from 5.9%.
According to the US Labor Department’s household survey, which includes self-employed and part-timers, the increase in jobs totaled 1.04 million. It could be said that the gain in new jobs sent the Dow and S&P 500 higher.
Besides that, the US 10-year yield also traded higher reversing its downtrend (bond prices fell).
This affected the technology-heavy Nasdaq Composite, which closed lower on Friday.
Here are the closing levels on Friday:-
| Last | Change | %Change | |
| Dow Jones | 35,208.51 | +144.26 | +0.41% |
| S&P 500 | 4,436.52 | +7.42 | +0.17% |
| Nasdaq Comp | 14,835.76 | -59.36 | -0.40% |
| US 10Y | 1.305 | ||
| VIX | 16.15 | 1.13 | -6.54% |
As mentioned previously, Federal Reserve (Fed) officials have made reference to jobs growth as a condition for tapering. These strong jobs report should put them on track to start tapering in September or soon after.
The other main factor influencing the Federal Reserve is inflation.
All eyes will now be watching the consumer price data that is due to be released on Wednesday, 11 August, and producer price index on Thursday, 12 August 2021. A stronger-than-expected reading would send a signal to the market that the Fed may have to consider changing its course.
The Infrastructure vote has been delayed once again. Earlier reports suggested that an agreement was on hand, but now it looks like it will take a few more days.
The question now is this: will the market continue to rally on the growth in jobs and the economy, potential boost from the stimulus, and ignore inflation, rising 10-year yields, and the Fed’s potential tapering?
We have already seen the impact of rising 10-year yields on the Nasdaq.
This uptrend has so far shown to be strong to weather any bad news and buying on dips has been the norm.
Many will point to the recent rise in COVID-19 cases in the US and around the world as a cause for concern and calls for a pullback will grow stronger as valuations get stretch.
Even with the CBOE Volatility Index closing at low 16.15, it is good to note that we are in the summer holiday period and volatility may spike at any time.
Source: CBOE, Reuters, Bloomberg
This commentary was written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years.
Disclaimer
While every effort has been made to ensure the accuracy of the information in this document, the DOO Group does not warrant or guarantee the accuracy, completeness or reliability of this information. The DOO Group does not accept responsibility for any losses or damages arising directly or indirectly, from the use of this document. The material contained in this document is provided solely for general information and educational purposes and is not and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, securities, futures, options, bonds or any other relevant financial instruments or investments. Nothing in this document should be taken as making any recommendations or providing any investment or other advice with respect to the purchase, sale or other disposition of financial instruments, any related products or any other products, securities or investments. A decision to invest in financial instruments, any investment related products or any other products, securities or investments should not be made in reliance on any of the statements in this document. Before making any investment decision, prospective investors should seek advice from their own financial advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision.
Without limiting any of the foregoing, in no event will the DOO Group or any of its affiliates be liable for any decision made or action taken in reliance on the information in this document and, in any event the DOO Group and its affiliates shall not be liable for any consequential, special, punitive, incidental, indirect or similar damages arising from, related to or connected with this document, even if notified of the possibility of such damages.
This document contains forward-looking statements. The forward-looking statements included in this document are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on the analysis of DOO Group of the statistics available to it. Assumptions relating to the forward-looking statement involve judgments with respect to, among other things, future economic, competitive and market conditions all of which are difficult or impossible to predict accurately. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the DOO Group that the forward-looking statements will be achieved. The DOO Group cautions you not to place undue reliance on its forward looking statements and we assume no responsibility for updating any forward-looking statements. Expressions of opinion are those of the authors and are subject to change without notice.
This document is strictly confidential to the recipient. It is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly to other person or published, in whole or in part. For any purpose, neither this document nor any copy of it may be taken or transmitted into Singapore, Hong Kong, Malaysia, United Kingdom and the United States or distributed directly or indirectly in Singapore, Hong Kong, Malaysia, United Kingdom and the United States. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document should inform themselves about, and observe any such restrictions. By accepting this report you agree to be bound by the foregoing instructions.
