The major indexes made a tidy little jump out of the gate Thursday in response to fresh, encouraging data on the employment front a day after a weak August ADP payrolls reading ruffled some feathers.
The Labor Department reported that jobless-benefits claims for the week ended Aug. 28 dipped to 340,000 – the lowest tally since March 2020, and 5,000 claims fewer than what economists expected – brighter news than yesterday's weak payroll report from payroll firm ADP.
U.S. crude oil futures rose 2.0% in response, to $69.99 per barrel, helping ConocoPhillips (COP, +3.6%), Exxon Mobil (XOM, +2.4%) and others benefited most from this early pop.
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Stocks, however, broadly finished below their intraday highs. The S&P 500 (+0.3% to 4,536) and Nasdaq Composite (+0.1% to 15,331) both managed to scratch out fresh highs. The Dow Jones Industrial Average closed 0.4% higher to 35,443, and the small-cap Russell 2000 (+0.7% to 2,304) recorded its third consecutive improvement.
From here, attention shifts to tomorrow morning's August jobs report. "It feels like the market is set up for a 'Goldilocks' number after yesterday's ADP miss. ADP has not been a good indicator for the official data over the past year," says Michael Reinking, senior market strategist for the New York Stock Exchange. "Given the positioning, it feels like there is a little more risk if the number were to surprise to the upside. If nonfarm payrolls are above the estimate (~750k), this could very well push the Fed to move in September. Anything below 500k would provide some additional cover."
Steve Sosnick, chief strategist at Interactive Brokers, provides additional insight into why the ADP report might not be indicative of what's to come tomorrow.
"It would be logical to think ADP payrolls offer an excellent guide to the nonfarm payroll numbers that follow. Unfortunately, the data shows otherwise," he says, noting that the correlation "stinks" over the past 20 years. "I believe that most of the differences stem from the different types of data that are collected. ADP data is collected from their customers, who skew larger, while (Bureau of Labor Statistics) data specifically attempts to reach smaller businesses."
Other news in the stock market today:
- Online pet-goods retailer Chewy (CHWY, -9.3%) sank after announcing quarterly sales of $2.16 billion – up a robust 27% year-over-year but just shy of analysts' estimates. The company's net loss of 4 cents per share also came in deeper than expected (-2 cents), and Q3 sales guidance of $2.20 billion to $2.22 billion also disappointed the pros ($2.23 billion).
- After plunging nearly 17% on Tuesday in the wake of a disappointing earnings report, Zoom Video Communications (ZM) shares have stabilized, adding 1.5% today. Zoom's latest quarterly results and subsequent stumble don't have Wall Street pros throwing in the towel, though. The majority maintain a Buy recommendation on ZM, and ARK Invest CEO Cathie Wood took the opportunity to buy the dip. You can read more about ZM stock's recent movements here.
- Analysts are staying bullish on Five Below (FIVE), too, even as shares spiraled 13.0% following the discount retailer's turn in the earnings confessional. For its second quarter, FIVE reported better-than-expected earnings of $1.15 per share, but revenue of $646.6 million fell short of the consensus estimate. BofA Global Research analysts reiterated their Buy rating on the stock. FIVE's "diverse assortment and strong value proposition resonates with consumers seeking value and we see a long runway for growth," they wrote in a note. Meanwhile, Jefferies analysts say to "buy the dip" as "new store growth remains high ... and cash flow generation is strong."
- Gold futures shed 2.5% to settle at $1,811.50 an ounce.
- The CBOE Volatility Index (VIX) advanced 1.4% to 16.34.
- Bitcoin enjoyed another up-day, climbing 2.3% to $49,329.97. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Healthcare: The Market's Steady Eddie Sector This Year
Healthcare stocks keep threading the needle in 2021.
The sector has delivered a 20.5% return so far this year – smack-dab in the middle of the market's 11 sectors, and just 28 basis points behind the S&P 500 itself, with exceedingly low volatility along the way. (A basis point is one one-hundredth of a percentage point.)
That performance illustrates the sector's two-pronged appeal: the potential for growth thanks to long-term spending trends as well as the development of blockbuster pharmaceutical and biotechnology treatments, and the defensive, income-minded production of established pharma firms whose products are a necessary expenditure for millions of Americans.
While you certainly have your pick of the litter with individual stocks, you might be among the investors who would prefer to simply grab a large portion of the sector and call it a day. We've explored several ways you can do that with top-notch healthcare exchange-traded funds (ETFs), which allow investors to get exactly the type of sector exposure they want.
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