Business

S&P 500, Dow touch fresh peaks as solid jobs data boosts cyclicals

5 minute read

A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 5, 2021. REUTERS/Andrew Kelly

  • S&P 500 financial, materials, energy sectors lead gains
  • July nonfarm payrolls up by 943,000; unemployment rate falls
  • Zynga plunges on bleak bookings forecast, acquisition plans
  • Indexes: Dow up 0.38%, S&P up 0.17%, Nasdaq down 0.40%

Aug 6 (Reuters) - The Dow and the S&P 500 indexes scaled record highs on Friday as shares in economy-linked sectors jumped following a solid rise in jobs in July, helping allay fears of the Delta variant impacting a nascent economic recovery.

Nonfarm payrolls increased by 943,000 jobs last month, a Labor Department report showed, amid demand for workers in the labor-intensive services industry. Economists were expecting 870,000 job additions. read more

"It's exactly the kind of report that the market wanted, in that it is strong," said Seema Shah, chief strategist at Principal Global Investors.

"It suggests that a labor market recovery is in play but also not so strong that it's going to push forward the timings of the Fed tapering. That is goldilocks, that perfect mix of strong but not too strong."

Five of the 11 major S&P 500 sectors were higher in early afternoon trading, with financials (.SPSY), materials (.SPLRCM) and energy (.SPNY) gaining more than 1.5% each. The S&P 500 technology sector index (.SPLRCT) fell 0.1%.

The much-awaited jobs numbers dovetailed with data that showed a further decline in U.S. unemployment claims last week and strong corporate earnings reports.

Although the three main indexes are set to end the week with gains following a stellar corporate earnings season, fears of higher inflation resulting in a sudden tapering in monetary policy have hurt sentiment.

Focus now turns to a meeting of Federal Reserve leaders in Jackson Hole, Wyoming, later this month to discuss policy and decide future stimulus strategy.

At 12:01 p.m. ET, the Dow Jones Industrial Average (.DJI) was up 132.95 points, or 0.38%, at 35,197.20 and the S&P 500 (.SPX) was up 7.49 points, or 0.17%, at 4,436.59.

The Nasdaq Composite (.IXIC) was down 59.35 points, or 0.40%, at 14,835.76, pressured by declines in growth stocks including Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O).

"The more highly valued Nasdaq is slipping back, as capital flows out of the more highly valued areas of the market and into the cheaper parts," said Michael Hewson, chief market analyst at CMC Markets UK.

On the earnings front, American International Group Inc (AIG.N) rose 4.8% as it beat second-quarter profit estimates on Thursday. read more

Zynga Inc (ZNGA.O) tumbled 18.1% after issuing a disappointing forecast for bookings and announcing a potential acquisition worth over half a billion dollars. read more

Corteva Inc (CTVA.N) rose 8.4% after raising its net sales forecast for the year. read more

Analysts expect second-quarter profit growth of 92.9% for S&P 500 companies, according to IBES data from Refinitiv. Of the 427 companies in the index that have reported earnings so far, 87.6% beat analyst expectations, the highest on record.

In other corporate news, short interest in star stockpicker Cathie Wood's flagship ARK Innovation (ARKK.P) ETF hit an all-time high of 12%, the Financial Times reported, citing data from analytics firm S3 Partners.

Advancing issues outnumbered decliners by a 1.30-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.06-to-1 ratio on the Nasdaq.

The S&P index recorded 38 new 52-week highs and no new low, while the Nasdaq recorded 94 new highs and 57 new lows.

Reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila, Arun Koyyur and Maju Samuel

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