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Stocks rose to record levels on the heels of a key labor market report, which reflected a stronger-than-expected rebound in employment last month and a marked drop in the jobless rate.
The S&P 500 logged record closing and intraday highs, extending record-setting gains from a day earlier. SLOTXO The Dow added more than 100 points, or 0.4%, and also set a record high. The Nasdaq dipped as Treasury yields gained across the curve after the better-than-expected print on the labor market's recovery. For investors, all eyes on Friday were fixed on the Labor Department's July jobs report. The print showed a whopping 943,000 jobs came back last month as the unemployment rate fell to the lowest level since March 2020. The report also showed upward revisions to the past two months' payroll gains.
But with the Delta variant running rampant across the U.S. and other constraints to the labor market still at play, many pundits have suggested the economy is not fully in the clear yet. Just earlier this week, ADP's closely watched print on private payrolls registered as a sharp disappointment, with only 330,000 jobs coming back versus the nearly 700,000 expected. While the ADP report has historically not tracked perfectly with the Labor Department's "official" monthly jobs reports, it has tended to be a good directional indicator of trends in the labor market.
And for equity investors, some moderation in the pace of the recovery may be perceived as the more desirable outcome.
“The market actually wants a bad jobs report, perverse as that sounds,” Opimas CEO Octavio Marenzi, told Yahoo Finance Thursday afternoon, adding it wants “the job numbers to come in weak so the Fed has a reason to continue its monetary policy.”
Namely, the Federal Reserve has suggested it is looking for more progress in the economic recovery before moving to announce or actually implement changes to its highly accommodative policies. Earlier this week, Federal Reserve Governor Christopher Waller said that he would support announcing tapering of the central bank's crisis-era bond purchases by September if the next couple jobs report come in strongly. Likewise, Federal Reserve Vice Chair Richard Clarida said he would back an interest rate increase in 2023 if the economic recovery continues on its current trajectory.
Other economists suggested this month's jobs report would be only a backwards-looking indicator given the deceleration in growth occurring as a result of the latest wave of virus concerns.