Wall Street Clinches Records as Jobs Report, Covid Optimism Spurs Bullish Bets

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Wall Street Clinches Records as Jobs Report, Covid Optimism Spurs Bullish Bets
Credit: © Reuters.

By Yasin Ebrahim

Investing.com – The major averages ended the week at record highs Friday as a better-than-expected monthly jobs report and positive Covid-19 treatment news triggered a sea of green across Wall Street.  

The S&P 500 rose 0.47%, ending the day at a closing record of 4,697.53. The Dow Jones Industrial Average was up 0.57%, or 204 points and hit an intraday record of 36,328.31. The Nasdaq added 0.2% to end at a record of 15,971.59.  In small caps, the Russell 2000 Futures , also clinched a record close. 

The U.S. economy created 531,000 jobs in October, above forecasts for a gain of 450,000, while the unemployment rate fell to 6.7% from 6.8%.

Average hourly earnings rose 4.9% in October from last year and 0.4% from September as firms continue to hike wages and competition for employees, particularly in the leisure and hospitality sectors, remains intense. Hourly wage growth did slow from the 0.6% monthly gain in September.

The ongoing rise in wages, however, leaves the Federal Reserve vulnerable to falling behind the curve on inflation, potentially raising the risk the central bank may be forced to hike rates sooner.

"People will feel that squeeze from rising prices and that will then translate into more pressure on the organizations to raise wages and now that's coming through in the numbers," Johan Grahn, Head of ETF Strategy at Allianz (DE: ALVG ) told Investing.com in an interview on Thursday ahead of the jobs report. "That's where I see a risk of the Fed perhaps underestimating the impact rising wages might have on inflation."

In the fightback against Covid, Pfizer (NYSE: PFE ) said its experimental pill to treat Covid-19 cut the risk of hospitalization and death by a nearly 90%.  Pfizer jumped more than 10%, and the drug maker plans to request regulatory authorization on its pill as soon as possible.

The positive vaccine news fueled the reopening trade - bullish bets on stocks tied to the progress of the economic reopening – and led to jump in consumer discretionary stocks amid rising travel and hospitality stocks.

Expedia (NASDAQ: EXPE ) Group, Royal Caribbean Cruises (NYSE: RCL ), and Penn National Gaming (NASDAQ: PENN ) led the advancing stocks in the sector.

Stay at home stocks including Zoom Video Communications (NASDAQ: ZM ), Teladoc (NYSE: TDOC ) Health, and Peloton (NASDAQ: PTON ) slumped on the news, with latter already lower following an underwhelming quarterly report.

Communication services, meanwhile, were powered higher by a 16% rally in Live Nation Entertainment (NYSE: LYV ) after the event promoter swung to a profit in the third quarter as the return of live events bolstered growth.

Energy stocks rebounded from weakness a day earlier as oil prices resumed their climb higher following OPEC and its allied producers’ decision to keep production steady despite US calls to ramp-up output.

Big tech added to gains from earlier this week, with Apple (NASDAQ: AAPL ), Amazon.com (NASDAQ: AMZN ), Meta Platforms (NASDAQ: FB ) and Alphabet (NASDAQ: GOOGL ) in the green. Microsoft (NASDAQ: MSFT ) proved the exception, ending just below the flatline. 

In Washington, the House is expected to vote on President Joe Biden's $1.75 trillion economic plan and separate infrastructure bill later Friday.

Among the indexes that made record highs this week, the Russell 2000 's record high was perhaps the most notable, reflecting bullish investor sentiment on the risk assets.  

"In the last six months, you've seen the market rising, but with small caps and mid caps, largely not really participating," Chief Market Strategist David Keller at StockCharts told Investing.com in an interview on Friday.

But there has been a change in last couple of weeks, where “small caps are actually emerging, and the Russell 2000 is breaking out of a six month base, showing that investors are optimistic and putting risk back on,” Keller added. “That tends to lead to higher prices.”

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