Closing Stock Market SummaryEach of the major indices set intraday and closing highs on Friday, as the market remained convinced in the 2021 recovery narrative despite the mixed November employment report. The Russell 2000 rose 2.4%, pulling ahead of the S&P 500 (+0.9%), Dow Jones Industrial Average (+0.8%), and Nasdaq Composite (+0.7%).
Sector gains were paced by the S&P 500 energy sector, which tacked on another 5.4% gain to its rebound effort. The materials (+2.0%), real estate (+1.3%), and industrials (+1.2%) sectors were next in line, while the utilities (-1.0%) and consumer discretionary (-0.1%) sectors closed lower.
The headline jobs data featured a smaller-than-expected 245,000 addition to nonfarm payrolls (Briefing.com consensus of 650,000) and a 6.7% unemployment rate (Briefing.com consensus 6.9%), versus 6.9% in October. Digging deeper, permanent job losers increased by 59,000 to 3.743 million, representing 36.9% of the unemployed in November.
The market was undeterred by the slowdown in hiring and the increase in permanent job losers since the data would presumably force lawmakers to concede their differences in stimulus talks. House Speaker Pelosi said she talked with Senate Majority Leader McConnell about attaching a smaller stimulus plan to the year-end spending bill.
Notably, longer-dated Treasury yields retreated immediately after the release of the employment report in an affirmation of the market's upbeat economic outlook. The 2s10s spread widened by six basis points today to reach a fresh 2020 high of 83 bps.
The 2-yr yield decreased one basis point to 0.14%, while the 10-yr yield increased five basis points to 0.97%. The U.S. Dollar Index increased 0.1% to 90.76. WTI crude futures rose 1.3%, or $0.59, to $46.25/bbl.
In the growth-stock space, semiconductor and software stocks picked up the slack for the missing leadership from the top five mega-caps.
The Philadelphia Semiconductor Index (+2.8%) was aided by an encouraging sales report from the Semiconductor Industry Association, while DocuSign (DOCU 243.22, +12.21, +5.3%) and smaller software companies reported better-than-expected earnings reports.
Reviewing Friday's economic data, which featured the Employment Situation Report for November:
- November nonfarm payrolls increased by 245,000 (consensus 650,000). November unemployment rate was 6.7% (consensus 6.9%), versus 6.9% in October. November average hourly earnings increased 0.3% (consensus 0.1%) versus 0.1% in October.
- The slowdown in hiring and the increase in permanent job losers are key takeaways from the report for the market, which is apt to infer that Congress will see those trends as a basis for agreeing to more stimulus to pre-empt a benefits cliff on December 31.
- The U.S. trade deficit widened to $63.1 billion in October (consensus -$65.2 billion) from an upwardly revised $62.1 billion (from -$63.9 billion) in September. October exports were $4.0 billion more than September exports. October imports were $5.0 billion more than September imports.
- The key takeaway from the report is the rise seen in both imports and exports, as that is symptomatic of a pickup in global trade and economic activity.
- Factory orders for manufactured goods increased 1.0% m/m in October (consensus 0.8%) following an upwardly revised 1.3% increase (from 1.1%) in September. This is the sixth straight monthly increase in factory orders.
- The key takeaway from the report is the affirmation that business spending continued to increase in October, evidenced by a 0.8% increase in new orders for nondefense capital goods excluding aircraft, versus a 1.9% increase in September.
Looking ahead, investors will receive the Consumer Credit report for October on Monday.
- Nasdaq Composite +38.9% YTD
- S&P 500 +14.5% YTD
- Russell 2000 +13.4% YTD
- Dow Jones Industrial Average +5.9% YTD