Stocks were set for a slightly higher open Monday. (Photo by Spencer Platt/Getty Images)
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U.S. stocks ended mixed on Monday, as investors looked past Fed Chair Jerome Powell to August’s jobs report on Friday. European and Asian markets rallied.
The Dow Jones Industrial Average dropped 56 points, or 0.16%, but the S&P 500 rose 0.43% and the Nasdaq Composite advanced 0.9%. Both theS&P 500 and Nasdaq finished at record highs.
Trading action Monday took a different tone than that on Friday. Powell reassured markets on Friday that the Fed isn’t necessarily drawing any closer to raising short-term interest rates and that high inflation is likely transitory. Small capitalization stocks, the earnings of which are more sensitive to the economy, outperformed on Friday. On Monday, the Russell 2000 index of small caps dropped 0.5%.
One major reason the S&P 500 and Nasdaq were higher was because technology stocks — which have a heavy market capitalization weighting in the two indexes — rose. Meanwhile, the same strength was not seen in other parts of the market, with only about 51% of S&P 500 stocks gaining, according to FactSet. “Good performance in the tech basket is pushing the rest of the market higher,” writes Stefanos Bazinas, execution strategist at New York Stock Exchange.
Pending home sales fell 1.8% month-over-month in July, below estimates for growth of 0.4%.
August’s payrolls report, due Friday, will be the center of attention during what should be a fairly quiet week. It will also give investors a chance to see how the early end to unemployment benefits is helping to drive workers back into the job market. The unemployment benefits end for everyone on Sept. 6, however, which means there won’t be a read on the full impact until October’s report.
While investors want to see that the U.S. economy is adding jobs at a healthy pace, too strong a result could carry a negative implication for the stock market. With economists looking for 750,000 jobs to have been added in August, a number north of 1 million could mean the Fed would lower its monthly bond purchases faster than expected, says Michael Sheldon, chief investment officer of RDM Financial Group.
Others agree. “How fast will the Fed reduce its purchases from the current $120 billion monthly rate?” writes Christopher Smart, chief global strategist and head of the Barings Investment Institute. “That will likely be determined by some of the data coming in this week, including U.S. consumer confidence and jobs.”
Elsewhere, Hong Kong’s Hang Seng Index rose 0.5%, while the U.K.’s FTSE 100 was up 0.3%.
Hurricane Ida hit oil and has companies in the Gulf of Mexico region. Oil prices initially dropped, before rising 0.44% to $69.04 a barrel, while natural gas was off 1.5% to $4.32.
Catalent (CTLT) rose 0.28% after reporting a profit of $1.16 a share, beating estimates of $1.10 a share, on sales of $1.19 billion, above expectations for $1.14 billion.
Affirm Holdings (AFRM) stock rose 46.67% after announcing a partnership with Amazon.com (AMZN) for its buy-now-pay-later offerings.
Support.com (SPRT) stock rose 38.2% after having gained more than 1,000% this year. It looks to be a new “meme stock.”
Globalstar (GSAT) stock rose 64.34% after a report that Apple ‘s (AAPL) iPhone 13 will support satellite communications.
Moderna (MRNA) stock fell 3% after 1 million additional Covid-19 vaccine doses were pulled from Japan. Last week, 1.6 million contaminated doses were pulled.
Write to Ben Levisohn at ben.levisohn@barrons.com and Jacob Sonenshine at jacob.sonenshine@barrons.com
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