Vaccine, Stimulus Optimism May Overshadow Disappointing Jobs Data

Germany blocks Chinese takeover of satellite tech company
December 4, 2020
Bangladesh Moves Rohingya Refugees to Remote Island
December 4, 2020
Show all

Vaccine, Stimulus Optimism May Overshadow Disappointing Jobs Data

The major U.S. index futures are currently pointing to a higher open on Friday following the pullback seen in the previous session.

The futures have held on to earlier gains despite the release of a report from the Labor Department showing much weaker than expected job growth in the month of November.

The Labor Department said non-farm payroll employment rose by 245,000 jobs in November after jumping by a downwardly revised 610,000 jobs in October.

Economists had expected employment to increase by 469,000 jobs compared to the addition of 638,000 jobs originally reported for the previous month.

Despite the weaker than expected job growth, the unemployment rate dipped to 6.7 percent in November from 6.9 percent in October. The unemployment rate was expected to edge down to 6.8 percent.

Continued optimism about coronavirus vaccines may be helping traders shrug off the disappointing jobs data, as the slowdown in job growth came amid the recent surge in new cases and subsequent restrictions.

Traders may also be hoping that the weaker than expected job growth will spur lawmakers in Washington to finally pass a new fiscal stimulus bill.

In other economic news, a report released by the Commerce Department showed the U.S. trade deficit widened in the month of October.

After seeing strength for much of the session, stocks came under pressure going into the close of trading on Thursday. The major averages pulled back well off their highs, with the S&P 500 sliding into negative territory.

The S&P 500 edged down 2.29 points 0.1 percent to 3,666.72 after reaching a record intraday high, while the Dow rose 85.73 points or 0.3 percent to 29,969.52 and the Nasdaq edged up 27.82 points or 0.2 percent to a new record closing high of 12,377.18.

The late-day pullback on Wall Street came after a report from the Wall Street Journal said Pfizer (PFE) expects to ship half of the coronavirus vaccines it originally planned for this year because of supply-chain problems.

A company spokeswoman told the Journal that scaling up the raw material supply chain took longer than expected and noted the outcome of the clinical trial of the vaccine candidate was somewhat later than initially projected.

The strength seen earlier in the day partly reflected a positive reaction to a report from the Labor Department showing a much bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended November 28th.

The Labor Department said initial jobless claims dropped to 712,000, a decrease of 75,000 from the previous week’s revised level of 787,000.

Economists had expected jobless claims to edge down to 775,000 from the 778,000 originally reported for the previous month.

The weekly jobless claims data generated some positive sentiment ahead of the release of the Labor Department’s more closely watched monthly jobs report.

Traders also kept an eye on developments in Washington, as lawmakers have resumed negotiations over a new fiscal stimulus bill.

Senate Majority Leader Mitch McConnell, R-Ken., said a “compromise is within reach” but continues to favor his narrower approach to stimulus.

House Speaker Nancy Pelosi’s, D-Calif., deputy chief staff Drew Hammill noted the two leaders spoke by phone and have a “shared commitment to completing an omnibus and COVID relief as soon as possible.”

Both Democrats and Republicans have offered new stimulus proposals, although it remains to be seen if lawmakers will finally reach an agreement after months of stagnation.

Boeing (BA) helped to lead the Dow higher, with the aerospace giant jumping by 6 percent on news Europe’s largest airline Ryanair is placing a firm order for 75 additional 737 MAX airplanes.

Meanwhile, traders shrugged off a report from the Institute for Supply Management showing the slight pullback in the pace of growth in U.S. service sector activity continued in the month of November.

The ISM said its services PMI edged down to 55.9 in November after dipping to 56.6 in October, although a reading above 50 still indicates growth. Economists had expected the index to slip to 56.0.

Despite the late-day pullback by the broader markets, airline stocks held on to substantial gains. The NYSE Arca Airline Index soared by 4.5 percent to its best closing level in over nine months.

Significant strength also remained visible among housing stocks, as reflected by the 2.8 percent jump by the Philadelphia Housing Sector Index. The index rebounded after closing lower for four straight sessions.

Oil stocks also turned in a strong performance on the day, resulting in a 1.1 percent advance by the NYSE Arca Oil Index.

Most of the other major sectors ended the day showing more modest moves, contributing to the lackluster close by the broader markets.

Commodity, Currency Markets

Crude oil futures are climbing $0.45 to $46.09 a barrel after rising $0.36 to $45.64 a barrel on Thursday. Meanwhile, after advancing $10.90 to $1,841.10 an ounce in the previous session, gold futures are edging up $4.10 to $1,845.20 an ounce.

On the currency front, the U.S. dollar is trading at 103.99 yen versus the 103.84 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2147 compared to yesterday’s $1.2144.

Asia

Asian stocks turned in a mixed performance on Friday as uncertainty over Brexit and concerns over rising Covid-19 cases across the U.S. offset hopes that governments in countries such as Japan, the U.S. and Europe will deliver large-scale stimulus measures.

California announced its strictest new measures as the U.S. posted another day of record Covid-19 infections and deaths. Italian Prime Minister Giuseppe Conte has announced new restrictive measures in the country for the upcoming holiday season.

Chinese shares ended on a flat note after the Trump administration added Chinese chipmaker SMIC and oil giant CNOOC to a blacklist of alleged Chinese military companies, escalating tensions between the world’s two largest economies.

The benchmark Shanghai Composite Index finished marginally higher at 3,444.58, while Hong Kong’s Hang Seng Index edged up 0.4 percent to 26,835.92.

Japanese shares fell from a nearly 29-1/2-year high and the yen rose against the dollar after reports suggested that Pfizer is dialing back its coronavirus vaccine rollout plan for this year due to supply chain issues.

The Nikkei 225 Index ended down 58.13 points, or 0.2 percent, at 26,751.24, but posted its fifth consecutive weekly gain. The broader Topix ended marginally higher at 1,775.94.

Tokyo Electron tumbled 3.1 percent on profit taking after recent strong gains. Honda Motor advanced 1.5 percent and Nissan Motor surged 2.6 percent on reports that Japan plans to ban sales of new gasoline cars in around 15 years as part of plans to slash carbon emissions to zero on a net basis by 2050.

Australian markets eked out modest gains, led by banks. The benchmark S&P/ASX 200 Index rose 18.80 points, or 0.3 percent, to 6,634.10 and posted its fifth consecutive weekly gain. The broader All Ordinaries Index edged up 18 points, or 0.3 percent, to 6,865.30.

The big four banks rose between 0.4 percent and 1.3 percent, while conglomerate Macquarie Group jumped 2.3 percent to extend gains from the previous session.

Mining heavyweights BHP and Rio Tinto gained 0.6 percent and 0.9 percent, respectively, while smaller rival Fortescue Metals Group edged down slightly after recent strong gains.

Healthcare stocks finished broadly lower, with Cochlear falling 1.5 percent and Resmed declining 0.9 percent.

In economic news, retail sales in Australia grew a seasonally adjusted 1.4 percent month-on-month in October, a government report showed.

That was shy of expectations for an increase of 1.6 percent following the 1.1 percent decline in September. On a yearly basis, retail sales were up 7.1 percent.

Seoul stocks hit record highs as chipmakers surged amid buying by foreign investors despite health authorities reporting 629 new coronavirus infections today, the highest in the country since the first wave peaked in February and early March.

The benchmark Kospi jumped 35.23 points, or 1.3 percent, to finish at 2,731.45, extending gains to a fourth straight day. Samsung Electronics rallied 2.6 percent and SK Hynix added 3.1 percent as rival Micron Technology’s facility in Taiwan faced power outage.

South Korea posted a current account surplus of $11.66 billion in October, the Bank of Korea said, up from $10.21 billion in September.

Europe

European stocks have gained ground on Friday on optimism over a swift economic recovery from the coronavirus pandemic.

Vaccine hopes, rising oil prices and growing prospects of a large U.S. economic stimulus package have helped underpin sentiment, while the upside remains capped by rising coronavirus cases in the U.S. and escalating U.S.-China tensions.

In economic news, German factory orders grew at a faster pace in October, data from Destatis revealed, in a good sign for the region’s recovery.

Factory orders grew 2.9 percent sequentially in October, faster than September’s 1.1 percent rise. Orders were forecast to climb 1.5 percent. Year-on-year, factory orders advanced 1.8 percent, in contrast to a 1.1 percent decrease in September.

The French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.6 percent, although the German DAX Index has bucked the uptrend and edged down by 0.1 percent.

Brexit talks continued to drag on, with British officials accusing French President Emmanuel Macron of making fresh demands at the eleventh hour.

Energy stocks have gained ground as OPEC and other oil producing countries agreed to increase output beginning next month at a much slower pace to overcome coronavirus-induced demand concerns.

SSE Plc shares have jumped. The energy company said it agreed to sell a 10 percent stake in the first two phases of Dogger Bank Wind Farm to Eni for an equity consideration of £202.5 million.

Associated British Foods has also risen. The food processing company said that it continues to expect Primark sales and profit to be higher this financial year compared to last.

Shares of Dassault Aviation have moved sharply higher following reports that Indonesia may buy 48 Rafale jet fighters.

On the other hand, property developer Berkeley Group Holdings has fallen after posting a drop in profit for the first half of financial 2021.

Latour has plummeted after its majority owner announced the sale of 10 million shares in the Swedish investment company.

BioNtech shares have also moved to the downside as Pfizer slashed the 2020 production target of its Covid-19 vaccine, citing challenges in the supply chain.

Meanwhile, Moderna said it expects to supply up to 125 million doses of its experimental vaccine around the world in the first quarter of 2021.

U.S. Economic Reports

A closely watched report released by the Labor Department on Friday showed U.S. job growth slowed by much more than anticipated in the month of November.

The Labor Department said non-farm payroll employment rose by 245,000 jobs in November after jumping by a downwardly revised 610,000 jobs in October.

Economists had expected employment to increase by 469,000 jobs compared to the addition of 638,000 jobs originally reported for the previous month.

Despite the weaker than expected job growth, the unemployment rate dipped to 6.7 percent in November from 6.9 percent in October. The unemployment rate was expected to edge down to 6.8 percent.

A separate report released by the Commerce Department showed the U.S. trade deficit widened in the month of October.

The report said the trade deficit widened to $63.1 billion in October from a revised $62.1 billion in September. Economists had expected the deficit to widen to $64.8 billion from the $63.9 billion originally reported for the previous month.

The wider deficit came as the value of imports increased by $5.0 billion or 2.1 percent to $245.1 billion, while the value of exports climbed by $4.0 billion or 2.2 percent to $182.0 billion.

Chicago Federal Reserve President Charles Evans is due to participate in virtual moderated question-and-answer session before the Michigan Bankers Association at 9 am ET.

At 10 am ET, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of October. Factory orders are expected to increase by 0.8 percent.

Federal Reserve Governor Michelle Bowman is also due to speak on “Community Banking and FinTech” before a virtual Independent Community Bankers of America (ICBA) ThinkTECH Policy Summit 10 am ET.

At 11 am ET, Minneapolis Federal Reserve President Neel Kashkari is scheduled to participate in moderated question-and-answer session before a virtual Southeast Minnesota 2020 Economic Summit.

Stocks In Focus

Shares of Cloudera (CLDR) are moving sharply higher in pre-market trading after the cloud software company reported better than expected third quarter results and boosted its share buyback plan by $500 million.

Electronic documents company DocuSign (DOCU) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates and providing upbeat guidance.

Meanwhile, shares of Marvell Technology (MRVL) may come under pressure after the chipmaker reported third quarter earnings in line with expectations but warned of supply constraints.

Cosmetics store chain Ulta Beauty (ULTA) is also likely to give back ground after reporting third quarter earnings that beat analyst estimates but on slightly weaker than expected sales.

For comments and feedback contact: editorial@rttnews.com

Leave a Reply

Your email address will not be published. Required fields are marked *