The Dow Jones Industrial Average fell on Friday and the S&P 500 slid from a record high after the August job report fell below expectations, showing the effects of the delta-powered Covid resurgence.
The Dow lost 74.73 points, or 0.21%, to 35,369.09 while the S&P 500 was down 0.03% to 4,535.43 after posting a slight gain in afternoon trading. The broader market index was supported by technology stocks, which helped the Nasdaq Composite rise 0.21% to 15,363.52.
The number of employees outside the agricultural sector rose by 235,000 in August, the Ministry of Labor said on Friday. Economists surveyed by Down Jones reckoned 720,000 jobs. The report marks a significant slowdown from the revised 1.053 million figure in July and comes as the Delta variant of Covid-19 resulted in health restrictions being reintroduced in some states and cities.
Federal Reserve Chairman Jerome Powell has stressed the need for stronger employment data before the central bank abandons its massive bond buying program, and the disappointing report could change expectations of when the Fed will begin its tapering process.
“A surprisingly low number of jobs this morning tarnishes the prospects for reducing the decline significantly, as only 235,000 jobs were created in August, which is likely to give the Fed a break and move ahead with its plans to announce its plans to cut bonds,” Chris said Zaccarelli, chief investment officer of the Independent Advisor Alliance, said in a note. “A lot of people believed that the Fed would announce its taper plans at the FOMC meeting this month, and that is no longer likely.”
The report raises questions about the US economy’s long-term growth path, but the Fed’s impact seemed to offset that in Friday’s trading, said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
“The early response was more difficult, but there is at least some consolation now as the Fed is pulling back on the tightening and may generally increase the adjustment for longer, which at least gives the market some consolation,” Ma said.
The central bank will also look at how much Covid affected attitudes and activity in August. The virus variant has been a wild card for the economy, and its impact could be a factor influencing the Fed as it considers taking the first step away from easing policies. In the leisure and hospitality industry, the sector hardest hit by the pandemic in 2020, no jobs were created in August, according to the report.
Modest gains in big tech stocks like Apple and Nvidia helped the market indices. Builder stocks like Lennar and PulteGroup were under pressure, as was cruise stocks. American Express fared worst on the Dow as financial stocks struggled.
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Goldman Sachs chief economist Jan Hatzius said on Squawk on the Street that the effects of the Delta variant could diminish in the coming months, with cases and hospital admissions in some states now falling, and that the overall report is more of a ” mixed picture “is” as the headline suggested Miss.
“I think there is reason to believe that things are getting better and we are getting better [jobs] Numbers in the coming months, “said Hatzius.
In a press conference on Friday, President Joe Biden announced the average monthly job gains since taking office and the lowering of weekly jobless claims, and called for more vaccinations and for Congress to pass infrastructure and budget laws. Biden also said states should consider using federal aid funds to extend the expanded unemployment benefits, which expires this week.
“Despite the progress we’ve made, we’re not where we need to be in our economic recovery,” said Biden.
The Nasdaq was the best performing index of the week, up 1.5%. The S&P 500 gained about 0.6% while the Dow lost about 87 points, or 0.2%.