Stocks were down Friday, even as jobs data for July was exceptionally strong, given the current environment.
The S&P 500 fell as much as 0.45%, dragged down by the tech-heavy Nasdaq’s loss of as much as 0.4%, although many sectors were indeed suffering. The 10-Year Treasury yield was down to 0.53%. Yields fall when prices rise.
The U.S. added 1.76 million jobs in July, better than the expectation of roughly 1.5 million. The unemployment rate fell to 10.2% from over 11%. This points to a fast economic recovery.
Cyclical stocks were flat-to-down, with many consumer discretionary stocks down in early trading. An improving unemployment rate adds dollars in circulation that should boost these stocks, especially as investors expect a rebound in 2019 to pre-virus levels of economic output and earnings. Oil and banks also fell considerably.
"The economy is proving more resilient than many people thought – the jump in payrolls of 1.76mm (and higher than the 1.48mm expected) is showing more strength in the job market, which should be good news for equities and other risk assets,” wrote Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance in emailed remarks to reporters.
But cyclical stocks have struggled to gain meaningful traction in recent days. Economic data have pointed to a slowing recovery, with Friday’s jobs report bucking that trend, a rare occurrence for the past few months.
Some defensive stocks like large cap consumer staples were rising slightly, as investors move into safer areas of the financial market.
And Seema Shah, Chief Strategist at Principal Global did point out that "with Congress failing to agree on a new fiscal stimulus package yet, the risk is that a policy failure drains the tentative strength that had been creeping back into the economy."
As investors look for growth tech stocks to hold for the medium-term during economic choppiness, they didn’t find one in Uber (UBER) - Get Uber Technologies, Inc. Report after earnings. Uber posted better-than-expected revenue and a slimmer adjusted EBITDA loss Thursday after the bell, but the stock fell 4.6% Friday. Food delivery surged amidst the at-home environment, while question marks around the rides business’ recovery remain.