Stocks started Friday modestly lower after the government reported that employers added just 235,000 new jobs in August, well below the consensus estimate of 720,000, says Jon Markman, editor of Pivotal Point.
Cyclical issues swooned while tech stocks found a bid after some initial selling. In the end the S&P 500 index closed at 4,535, essentially unchanged for the session.
I understand there is a lot of bearish chatter about signs of a weak economy, yet stock market gains since the middle of May have been remarkably persistent. Stocks have grinded higher with small blips lower about every four or five weeks.
If the pattern continues, traders should expect a decline of 2.6% two weeks from Tuesday. Though to be fair, most such patterns disappear as soon as you notice them.
Even with that hypothetical decline the benchmark S&P 500 would remain above critical support at 4,400.
The big news for us was a stellar earnings report by digital transformation leader MongoDB (MDB). It shot a stunning 26% higher following raised guidance and better than expected second quarter financial results. The next generation database company lost 24 cents per share during Q2, narrower than the expected 39 cent per share deficit. MDB was in our main portfolio for a long time and is now a sparkling alumni.
Broadcom (AVGO) and DocuSign (DOCU) also posted financial results ahead of expectations and issued upbeat guidance. Shares are rising 2% and 5.3% respectively. There is an underlying theme: Business is good at tech firms focused on the great digital transformation, and getting better.
Bottom line: Bears were hoping traders would begin selling good news during September. So far it is not working out that way but stay on your toes as Septembers are historically challenging. If a selloff does emerge in the next two weeks, it should be seen as an opportunity for bulls to add to their positions—not panic.
The Dow fell 0.2% on Friday while the S&P 500 finished flat and the Nasdaq 100 rose 0.3%. The US 10-year Treasury yield advanced by 3 basis points to than 1.32% while crude oil fell 0.7%.
Breadth favored decliners by a 4-3 margin and there were 561 new one year highs vs. 39 new lows. Leading the new highs were Adobe, Abbot Labs, Accenture, Costco, Blackstone, ServiceNow, American Tower, Prologis, Edwards Lifesciences. and General Dynamics. That’s a solid and diverse vanguard including tech, retail, finance, communications and aerospace.
In economic news, US non-farm payrolls rose by 235,000 in August from an upwardly revised 1.05 million jump in the previous month, the Bureau of Labor Statistics said. The print trailed the monthly job growth average this year of 586,000 while also missing expectations for a surge of 740,000.
Leisure and hospitality job growth stalled amid resurgence in COVID-19 cases, complicating the Federal Reserve's decision when it should begin tapering its monthly $120 billion of asset purchases.
"September likely will be weak too, and we're becoming nervous about the prospects for a decent revival in October, given that behavior lags cases, and cases are yet to peak," Pantheon Macroeconomics chief economist Ian Shepherdson wrote in a note. While the Fed is currently expected to announce a tapering decision in December, "the FOMC could easily be forced to wait until January," Shepherdson wrote.
Meanwhile the Institute for Supply Management's US services index fell to 61.7 in August from a record 64.1 in July, about in line with expectations for a decline to 61.6.
The worst performers in the S&P 500 included stocks which were among the worst hit by the Covid-19 pandemic last year. Carnival (CCL), Royal Caribbean Group (RCL), Norwegian Cruise Line Holdings (NCLH), and Hilton Worldwide (HLT) were each down at least 2.7%.
Visa (V) reported US payments volume increased 21% year-over-year in August, compared with a growth of 23% seen in July. During the month, credit was up 26% from last year. Shares rose 0.4%.
Learn more about Jon Markman at Pivotal Point.
