The day after. Stocks opened mixed after today’s report of 1.4 million jobs created (more on this below). Following one of the worst performing days in months on Thursday, conversation swirls around whether this is finally the well-deserved pullback after a 60% rally for the S&P 500 Index. News is light ahead of the holiday weekend, other than the jobs talk. European markets are mostly higher at midday trading, while Asia finished in the red.
Jobs market remains solid. August nonfarm payrolls came in near expectations at 1.4 million jobs created, down from last month’s 1.7 million jobs. The unemployment rate was the big surprise, as it moved down to 8.4% versus an expected 9.8%. There were some concerns over the labor market prior to this report, but once again, the economy remains strong. We will discuss this in more detail later today on the LPL Research blog.
Stocks go up and down. Thursday was one of the worst days of the year, as the S&P 500 fell 3.5%, while the Nasdaq fell 5% and the tech sector fell 5.7%, with some of the high-flying groups taking the worst of the sell-off. In fact, it was the largest drop ever after a new high for the Nasdaq and third largest ever for the S&P 500. Technology had been up 10 days in a row, so a pullback was likely. In the end, stocks have had a historic run and are quite stretched in the near term. We don’t think this weakness is overly concerning at this time, and more volatility could be in store. This is a nice reminder that stocks do go up and down, but the good news is the S&P 500 is still up 7% year-to-date, with the Nasdaq up 28%.
Technical update. US equities suffered their largest sell-off since early June on Thursday. Support levels to watch for the S&P 500 are the February highs at 3393, followed by the 50-day moving average at 3292. On the Nasdaq Composite, the range from 10,200 to 10,800 offers multiple levels of technical support; however, history suggests that an eventual move back to its 200-day moving average is not out of the question given how overbought the index was.
COVID-19 news. Around 44,000 new cases were reported Thursday, leaving the seven-day average just below 40,000 and down 3% week over week (source: COVID Tracking Project). Hospitalizations dropped 7.9% week over week, the 11th straight decline. School openings, Labor Day holiday weekend activities, and the kickoff of the NFL season on September 10 will test the country’s ability to contain the virus and will be watched closely. Novo Nordisk is exploring whether drugs that fight diabetes and obesity might be effective against COVID-19.
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