Better-than-expected employment news was Wall Street's central focus Friday, and the driving force behind new record highs in all three of the major stock indexes.
The Labor Department reported that the U.S. added 850,000 nonfarm payrolls in June, well above the consensus economist expectation of 720,000.
One unwelcome surprise, however, was the unemployment rate, which ticked higher to 5.9%, from 5.8% in May, and exceeded the 5.6% figure economists were looking for.
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"Despite the snappy headline print, the June jobs report actually casts a dimmer light on the economic recovery," says Sal Guatieri, senior economist at BMO Capital Markets. "Most of the new jobs now being created are in sectors that were slammed by the pandemic, while companies in other industries are struggling to find available workers … this doesn't bode well for strong organic growth."
So, why the clearly positive response in equities?
"The payroll report is effectively a goldilocks report for both the economy and markets," says Amit Sinha, head of Multi-Asset Design at Voya Investment Management. "It validates the growth story while reducing fears of the Fed taking away the punch bowl anytime soon."
The S&P 500 (+0.8% to 4,352) and Nasdaq Composite (+0.8% to 14,639) both closed at new all-time highs – a routine occurrence of late. The Dow Jones Industrial Average joined the party, finishing up 0.4% to 34,786, surpassing its previous record close of 34,777, set on May 7.
LPL Financial Chief Market Strategist Ryan Detrick adds that the June jobs report provided some clues into the near-term future for inflation.
“The sustainability of bargaining power for relatively lower wage service sector workers who return to the labor force is going to be an important tell on the inflation debate,” he says. “Wage increases can lead to stickier inflation, and at the moment some employers have no choice but to pay up in order to meet surging demand. Whether this dynamic holds past summer and into the fall, though, remains to be seen.”
And guess what? We're now rolling into a long weekend, as the markets will close Monday in observance of Independence Day.
Other action in the stock market today:
- The small-cap Russell 2000 didn't participate in the rally, declining a full 1.0% to 2,305.
- International Business Machines (IBM) was the worst Dow stock today, shedding 4.6%. Today's drop came in response to news that the tech company's president, Jim Whitehurst, is stepping down. Whitehurst took the role following IBM's acquisition of Red Hat – where he served as CEO for 12 years – in April 2020. He will stay on in an advisory role.
- Virgin Galactic Holdings (SPCE) was a big mover on news the company's founder, Richard Branson, will be on its July 11 spaceflight test. This gives Branson the upper hand in the "billionaire space race," beating out Amazon.com (AMZN) founder Jeff Bezos, who is slated to be a passenger on a July 20 spaceflight from his company Blue Origin. SPCE ended the day up 4.1%.
- U.S. crude oil futures finished with a marginal loss at $75.16 per barrel.
- Gold futures settled up 0.4% at $1,783.30 an ounce.
- The CBOE Volatility Index (VIX) declined 2.1% to 15.15.
- Bitcoin prices improved a modest 0.5% to $33,267.56. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.
Tech for the Long Term
We've spent much of the past couple weeks looking ahead to the rest of 2021, and most forecasts call for continued strength in value sectors such as energy, industrials and financials.
But once you start to look out years rather than months, many of the best growth opportunities are exactly where you'd expect them: technological trends.
Take electric vehicles (EVs), a global market that research firm Million Insights estimates will grow by 41.5% annually to reach $1.2 trillion by 2027. Or artificial intelligence (AI), which Grand View Research sees expanding by 40.2% annually to nearly $1 trillion by 2028.
But these and other tech trends all have one thing in common: They're powered by semiconductors.
Chip stocks, then, are almost impossible to ignore. Not only do they make up the foundations of most bleeding-edge technologies you can think of, but they're a necessary component of just about any device we interact with on a daily basis. But which plays stand out? Check out our look at seven of the best semiconductor stocks to buy.
Kyle Woodley was long SPCE as of this writing.
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