The stock market was mixed on Friday, paring back earlier losses to finish positive despite a stronger-than-expected July jobs report being offset by rising U.S.-China tensions and “disappointing” coronavirus stimulus talks.
The Dow Jones Industrial Average was up 0.2%, around 50 points, on Friday, while the S&P 500 rose 0.1% and the tech-heavy Nasdaq Composite lost 0.9%.
Stocks pared back early losses after the Labor Department released a better-than-expected monthly jobs report, which showed the U.S. economy adding 1.76 million jobs in July as some Americans who were laid off amid the coronavirus pandemic returned to work.
Not only did that beat Wall Street estimates, but the unemployment rate was also better than expected, falling from 11.1% to 10.2%.
Although unemployment ticked down for the third straight month, July’s job report is well behind the over 4 million payrolls gained in June, indicating a slowdown in the labor market’s recovery.
The latest jobs data comes as investors closely watch for updates on a new coronavirus stimulus bill, but Congress remains deadlocked with little progress after what Senate Minority Leader Chuck Schumer (D-NY) “disappointing” talks on Friday.
Market sentiment also took a hit after President Trump issued two executive orders on Thursday addressing “the threat posed” by Chinese apps TikTok and WeChat.
The order calls for a ban on any U.S. transactions with ByteDance and Tencent, the parent companies of TikTok and WeChat, respectively, which will take effect in 45 days.
The Trump administration further stoked rising U.S.-China tensions on Friday, issuing a fresh round of sanctions on 11 Chinese officials including Hong Kong leader Carrie Lam.
“Much of the rally that we’ve seen so far has been fueled by Federal government stimulus and Federal Reserve liquidity, but for it to continue, the economy needs to continue to heal and the data this morning is adding credence to the idea that things are continuing to improve,” says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
So far, 441 companies in the S&P 500 have reported second quarter earnings with more than 82% beating Wall Street expectations—the highest rate on record dating back to 1994, according to Refinitiv data. Just over 15% of companies so far have missed expectations.
What to watch for
Ongoing stimulus talks in Washington. Talks between Democrats and the Trump administration ended in disappointment on Friday after both sides failed to bridge major differences. While both sides have agreed on additional stimulus checks, major disagreements remain on what to do with federal unemployment benefits. Democrats want to extend the federal unemployment benefits of $600-per-week into next year, while Republicans have called for temporary $200-per-week payments that would eventually be replaced by a 70% wage-replacement program in September. Other areas of disagreement include funding for state and local governments, funding for coronavirus testing and money to help schools reopen in the fall.
1.8 Million Jobs Added In July As U.S. Economy’s Pandemic Recovery Falters (Forbes)
Three Major Issues Coming Up That Could Make Or Break The 2020 Stock Market (Forbes)
Dow Jumps Nearly 200 Points, Nasdaq Hits Record High After Better-Than-Expected Unemployment Data (Forbes)
U.S. Sanctions Hong Kong’s Leader Carrie Lam For ‘Policies Of Suppression’ (Forbes)
Gaming Stocks Plummet On Trump Executive Order Scare (Forbes)
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