Thursday 29 October, 2020

US stocks head for record high following solid jobs report

A government report revealing surprisingly solid job growth in October put investors in a buying mood Friday and drove broad gains for US stocks in midday trading.

The Labor Department said US employers added 128,000 jobs, far more than the 89,500 additions that economists expected. Job growth and consumer confidence have been among the key drivers of the US economy as other areas, particularly manufacturing, face a slowdown.

The gains on Friday mark a rebound from a slump on Thursday and put the S&P 500 on a path to reach its third record high this week and its fourth straight week of gains.

Banks and health care companies led the market higher. Citigroup rose 1.5 per cent and Bristol-Myers Squibb gained 1.4 per cent.

Rising oil prices and solid earnings from Exxon Mobil helped push energy stocks higher.

Utilities and real estate companies lagged the market as investors regained an appetite for risk and shifted money away from safe-play holdings. Bonds fell and the yield on the 10-year Treasury rose to 1.72 per cent from 1.69 per cent late Thursday.

KEEPING SCORE: The S&P 500 index rose 0.7 per cent as of 12:25 pm. Eastern time. The Dow Jones Industrial Average rose 245 points, or 0.9 per cent, to 27,291. The Nasdaq rose 0.7 per cent.

The Russell 2000 index of smaller company stocks outpaced the broader market in another sign that investors were confidently shifting money to riskier holdings. The index rose 1.5 per cent.

WEEKLY WIN: Solid earnings and economic reports injected confidence into the market throughout the week. The strong week included record highs on Monday and Wednesday, and now potentially Friday.

The latest employment figures capped a mostly positive round of economic reports that have helped alleviate concerns about a potential recession. On Wednesday, the Federal Reserve cut interest rates for the third time this year, but signaled that it plans no further cuts unless it sees clear evidence that the economic outlook has worsened.

EYES ON EARNINGS: Corporate earnings were a big focus on Wall Street this week. So far this earnings period, three-quarters of the companies that reported beat analyst's forecasts, which helped temper fears over a potentially steep contraction for profits. The majority of companies in the S&P 500 have now issued their latest results.

Companies in the index are now expected to report a profit slump of less than three per cent compared with prior forecasts for a contraction of more than four per cent. That figure is likely to continue improving as the remaining companies report, if previous quarters this year are a guide.

STRONG JUMP: Fitbit surged 14.8 per cent after the maker of wearable fitness technology agreed to be acquired for $2.1 billion by Google's parent company, Alphabet. Fitbit is a pioneer in the industry, but it's been under pressure from other device makers.

ENERGY RISING: Exxon Mobil rose 2.6 per cent after it beat Wall Street's third-quarter profit forecasts despite facing a sustained slide in oil prices. The company reported a three per cent increase in oil production along with a four per cent rise in liquids production driven by growth from its Permian Basin operations.

OVERSEAS: Asian markets mostly rose, though Japan's Nikkei 225 fell after a weak report on manufacturing. European markets also rose.

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