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US stocks close higher despite dismal November jobs data

On the week, the S&P 500, the Dow, and the Nasdaq increased 1.7%, 0.8%, and 0.7%, respectively

The US unemployment rate dipped to 6.7% last month, down from 6.9% in October

4:05 pm: US equities close higher; Dow moves past 30K

US stocks closed higher as investors shrugged off a disappointing US jobs report.

The Labor Department said the US economy added 245,000 jobs in November, well below consensus estimates of 440,000. The unemployment rate, however, matched expectations by falling to 6.7% from 6.9%.

On the day, the Dow Jones Industrial Average rose 248 points, or 0.83%, to a record 30,218. The S&P 500 jumped 0.88% to 3,699 and the tech-heavy Nasdaq increased 0.70% to 12,464.

12:10 pm: S&P 500 continues to set records

On Friday, the Dow jumped 181 points, 0.6%, to 30,150, and the Nasdaq Composite improved 65 points, 0.5%, to 12,442 at roughly noon ET. The S&P 500 managed another intraday high, gaining 25 points, 0.7%, to 3,692.

"The S&P 500 has hit yet another intraday record high thanks to the mixed US jobs report," CMC Markets UK analyst David Madden wrote. "The weaker aspect of the update — the disappointing headline number and the fall in the participation rate — adds weight to the argument that further financial assistance is needed to help the US economy... Equity traders have fallen back into the old lazy habit of buying stocks on the back of bad news."

The US economy gained 245,000 jobs in November, drastically lower than the Dow Jones consensus estimate of 440,000. Unemployment fell to 6.7% from 6.9%, in line with expectations.

Democrats, led by majority leader Chuck Schumer, are calling for a $908 billion stimulus package.

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9:45 am: US stocks hold gains at open 

US benchmarks started the last day of the trading week on the front foot despite disappointing monthly jobs data.

The upbeat trajectory of stocks on Wall Street this week continued as the Dow Jones Industrial Average added over 96 points at 30,066, the S&P 500 added over 12 at 3,678 and the tech-laden Nasdaq index gained over eight points at 12,385. 

Non-farm payrolls showed the US economy added just 245,000 non-farm jobs in November, due to the pandemic crisis, which was far weaker than the 480,000 economists had forecast.

But Fawad Razaqzada reckons the weak figures wont rattle equities much during their current "forward-looking" stance.

"Today’s much weaker US jobs data underscores the need for further stimulus, but essentially changes very little in as far as the recent trends are concerned," he said in a note.

"Weak data means the Fed will be no hurry to start tapering QE when the vaccines are rolled out. This should keep both the dollar bears and the stock market bulls happy."

The analyst suggested even tat the S&P 500 could hit a new high this week as optimism also pervades due to a potential  Brexit deal between the UK and the EU coming soon.

Also in macro focus, the US trade deficit was shown to have increased by 1.7% in October this year, according to official figures, underlining the ability of US consumers to spend on global goods.

It widened to US$63.1 billion in October from a revised $62.1 billion in September, while economists had expected a deficit of US$64.7 billion.

8.45am: Jobs fall by more than expected

US stock futures managed to hold their gains even though jobs growth dropped by much more than expected in November as a resurgence of new coronavirus (COVID-19) cases and the lack of an economic stimulus impacted a recovery from the pandemic.

Non-farm payrolls increased by just 245,000 jobs last month after rising by 638,000 in October, well below forecasts for an increase of around 465,000.

That was the smallest gain since the jobs recovery started in May and the fifth straight monthly slowdown in job gains leaving employment well below its February peak.

The US unemployment rate dipped to 6.7% last month, down from 6.9% in October.

US stock index futures held near all-time highs, however, as growing prospects for further economic stimulus and continued optimism over a COVID-19 vaccine-driven economic recovery underpinned sentiment.

Robert Alster, CIO at investment management firm Close Brothers Asset Management, commented: “As COVID infections continue to rise across the US, the importance of these jobs figures can’t be overstated.

“Despite increasingly promising vaccine news, the reality is we are still some way off a widespread rollout. This, in addition to unemployment figures, means one of the incoming White House administration’s first priorities will be developing a new stimulus package.

“But today the US is effectively rudderless as the world waits for January’s inauguration to get a glimpse of how President-elect Joe Biden will seek to run the largest economy in the world.”

7.55am: Optimism ahead of jobs report

Friday morning is expected to see a positive start on Wall Street as traders await the all-important non-farm payroll figures for November.

The Dow Jones Industrial Average and Nasdaq Composite are expected to extend gains when they get going, with the S&P 500 seen making up for its small reverse from a day earlier.

The timing of today’s US jobs report today is very interesting, says market analyst Craig Erlam at Oanda.

“A bad report could be what the doctor ordered, piling additional pressure on lawmakers to get a deal done, even an imperfect one that sees the country through the holiday period and to the end of January, at least.”

He said a strong jobs report may not be well received if it's used as a tool to negotiate down any relief effort by senate majority leader Mitch McConnell, who made similar comments last month.

“The concern could be that a seemingly strong report could remove some of the urgency needed to get this over the line before some support measures expire at the end of the year,” Erlam says.

But it's been a “decent” week so far in the markets, says Erlam, with plenty of enthusiasm around, whether that be from Covid vaccine results or the stimulus talks on Capitol Hill.

“For the first time this year, things are looking up and that optimism can be felt throughout these markets,” Erlam said.

“They are running low on fuel a little at this point though, with so much of that positivity now priced in.

“While talks getting underway over another relief package in the US is promising, it still feels there's a significant divide that needs to be overcome. The urgency to do so and pass something alongside a spending bill - needed to avoid a partial shutdown on 11 December - is also encouraging.”

Four things to watch for on Friday:

  • While the non-farm payrolls will be the big macro news, there may also be interest in the US trade balance for October, which is expected to see the nation’s trade deficit widen slightly to US$64.8bn from US$63.9bn in September
  • Also in focus will be the US unemployment rate for November, which is forecast to edge lower to 6.8% from 6.9% in October
  • The corporate results calendar is looking a little sparse, however, some investors may be interested in third quarter numbers from retailer Big Lots Inc (NYSE:BIG) and industrial distribution firm HD Supply Holdings Inc (NASDAQ:HDS)
  • Share price reaction may also be eyed from Moderna Inc (NASDAQ:MRNA) after the biotech said late on Thursday that its COVID-19 vaccine candidate could confer long-term immunity from the virus

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