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Stock Market Higher On Jobs Report: 943,000 Additions Add to Fed Rate Pressures

July jobs gains could trigger a change in Fed policy, but investors are still positioning themselves for a continued resurgence in Delta variant infections.

The Friday Market Minute

  • Global stocks mixed ahead of U.S. jobs report, with Asia sliding on Delta variant concerns and Europe holding gains on earnings strength.
  • Benchmark 10-year note yields rise to 1.247% ahead of July payrolls as investors bet on a bigger-than-expected reading for new job additions. 
  • Oil prices extend slide, setting up worst week in three months, as traders trim demand forecasts amid Delta infection surge.
  • Fund flows show defensive tenor, with tech, healthcare and bond portfolios seeing the largest interest this week, according to BofA data.
  • Novavax slumps after delaying its application for EUA approval of its developing coronavirus vaccine.
  • U.S. equity futures suggest a modestly firmer open on Wall Street following a July jobs report that showed 943,000 new additions and an unemployment rate of 5.4%.

U.S. equity futures moved modestly higher Friday after a stronger-than-expected July jobs reported that showed nearly 1 million new positions created last month in a reading that could challenge the Federal Reserve's accommodative policy stance.

Employers added 943,000 new jobs last month, according to the Bureau of Labor Statistics, following a weaker-than-expected reading of private sector employment growth from payroll processing group ADP on Wednesday has widened the range of estimated outcomes. The headline unemployment rate fell to 5.4% while average hourly earnings rose 0.4% from last month to $30.54 per hour.

Benchmark 10-year Treasury note yields moved higher, to trade at at 1.277%, in a move that could suggest investors are bracing for a headline figure nearer to 1 million that could, potentially, trigger a signal on tapering bond purchases later this month from Fed Chairman Jerome Powell.

Delta-variant infections, however, are adding to concerns about growth outside the United States, with 46 cities around the world now under some form of business or travel restriction as a result of the resurgence. 

That's clipped gains for emerging market stocks, which had their biggest weekly decline since March, as well as U.S. oil prices, which are down more than 6.3% from last week's $74 peak amid softening demand prospects.

Investor flows, in the meantime, are becoming more 'COVID defensive' as a result, with data from Bank of America showing increased fund manager interest in tech and healthcare stocks as well as a noting a big $12.1 inflow into bonds this week, nearly triple the $4.8 billion moving into stocks.

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That said, two of the three U.S. benchmarks closed at record highs last night, with the Nasdaq leading the charge, and Goldman's Sachs' analyst David Kostin has boosted his target level for the S&P 500 to 4,700 points by the end of the year.

Friday's opening, however, is more muted, with contracts tied to the Dow Jones Industrial Average indicating a 70 point opening bell gain and those linked to the S&P 500 priced for a 4 point bump. Nasdaq futures are indicating a 50 point decline.

Novavax  (NVAX) - Get Novavax, Inc. Report shares were an active pre-market mover, slumping 11.6% to $208.90 each, after the drugmaker said it would delay seeking emergency FDA approval for its developing coronavirus vaccine.

Beyond Meat  (BYND) - Get Beyond Meat, Inc. Report shares were also deeply in the red, trading 4.4% lower at $116.50 after the plant-based food group posted a wider-than-expected second quarter loss and forecast current quarter revenue growth that missed analysts' estimates. 

Robinhood  (HOOD) - Get Robinhood Report shares steadied, edging 3.3% higher to $52.65 each, after yesterday's 27.6% slump which was linked to the start of options trading and indications of early-investor selling in the online trading platform group.

In overseas markets, another solid week for European earnings, as well as accelerating vaccinations and continued pledged of support from the ECB, has kept shares within touching distance of their all-time highs, with the Stoxx 600 holding steady into the U.S. employment report release at 8:30 am Eastern time.

Overnight in Asia, however, the region-wide MSCI ex-Japan index is set to close out the worst week in two months in the red, with stocks down 0.33%, as Delta infections and Beijing's big crack crackdown weighing on sentiment.

In Japan, where the Olympic Games will come to a close this weekend, the Nikkei 225 ended the week 0.33% higher at 27,820.04 points.