The Labor Day holiday in the US tonight will leave markets wondering about direction for another 24 hours after Friday saw the release of the weakest jobs data so far this year.
Friday’s news saw value investors retreat and the megatechs back in favour as the share price of companies such as Apple and Netflix hit, or topped previous all-time highs.
The big driver in the US jobs data was the impact of rising Covid infections on jobs and on the job hunting by those looking for work.
The Dow lost 74.73 points, or 0.21%, to end the week at 35,369.09, while the S&P 500 edged lower by 0.03% to 4,535.43. Tech stocks helped to lift the Nasdaq by 0.21% to 15,363.52.
The Nasdaq – home of the big techs – was the best performing index for the week, rising 1.5%. The S&P 500 added 0.6%, while the Dow shed 87 points, or 0.2%.
Eurozone shares fell sharply on Friday down 0.7% and the S&P 500 finished flat as flat after initially falling on the back of the weaker than expected payroll report for August.
But it recovered the losses on expectations that the weak jobs situation will slow the Fed’s move towards tapering its quantitative easing (bond buying), thereby keeping the cheap money flowing for the tea party.
That’s why megatechs did well last week and helped lift the Nasdaq and S&P 500, while weak arguments for value investment ideas saw the Dow ease.
This could be temporary – at least until the September meeting of the Fed on the 21st and 22nd of the month and then this month’s jobs figures in a month’s time.
The August labour force report from the Bureau of Labor Studies shocked with only 235,000 new jobs created last month, less than a third of the 730,000 forecast from the market.
Some 1.5 million people not in the labour force indicated in the survey that they did not look for work because of the latest Covid Delta infections across parts of the US. That saw the unemployment rate dropped to 5.2% from 5.4% in July.
Non-farm employment has risen by 17.0 million since April 2020 but is down by 5.3 million, or 3.5%, from its pre-pandemic level in February 2020. Up to the latest lockdowns in Australia, our total employment was above the pandemic lockdowns at the start of 2020.
The impact of Covid Delta on Australian jobs will be laid bare by the latest payrolls data for to be released this Thursday.
Friday’s weak sessions capped a week when global share markets rose helped by expectations that the Delta outbreak won’t lead to lockdowns in major developed countries and that the Fed would be gradual in scaling back monetary stimulus after the week jobs data for August.
For the week US shares rose 0.6%, Eurozone shares edged up 0.1%, Japanese shares jumped 5.4% (with the impending departure of Prime Minister Suga) and Chinese shares rose 0.3%.
Helped by rapidly rising local vaccination rates and ignoring falling iron ore prices, the Australian share market rose 0.5%.
US 10-year bond yields finished about square with the week before at 1.32% while the US dollar fell on expectations that the Fed will delay the tapering (and tightening) of its spending and monetary policy. That saw the $A rise back above 74 US cents.
