Dow rises as report of strong jobs keeps cyclicals in play; Tech rebounds
By Yasin Ebrahim
Investing.com – The Dow climbed Friday as the unexpectedly strong job report fueled investor bets in cyclical sectors like energy, while the decline in tech buying on weakness also helped sentiment.
The increase was 0.90% or 279 points and the increase 0.96%, the increase 0.44% and had decreased by more than 2% during the day.
The US economy created jobs last month well above the economists’ consensus forecast of 182,000. The unemployment rate fell from 6.3% to 6.2%, underpinned by the easing of Covid-19 restrictions and an increase in vaccine distribution.
“While a report is not trending and the salary data is certainly volatile, it is safe to conclude that the winter soft patch is now officially over,” Jefferies (NYSE 🙂 said in a note.
Cyclical stocks – those that move in parallel with the economy – were buoyed by signs of faster recovery, with energy stocks moving higher amid rising oil prices.
Oil prices added to their gains as of Thursday when OPEC and its allies decided to keep production stable, prompting economists to revise their forecasts for energy prices amid continued tightening of global supplies.
Goldman Sachs (NYSE 🙂 raised its forecast by $ 5 a barrel to $ 75 a barrel in the second quarter and $ 80 a barrel in the third quarter of 21.
“We believe it is now clear that OPEC + is indeed pursuing a tight oil market strategy, with our updated supply-demand balance suggesting that the OECD will fall to its lowest level since 2014 by the end of this year,” said Goldman Sachs in a note.
Fears of a sharp rise in inflation initially rose sharply, dampening the outlook for soaring technology stocks. However, investors found buying the decline to help the sector break intraday lows.
Apple (NASDAQ :), Microsoft (NASDAQ :), Amazon.com (NASDAQ :), while Alphabet (NASDAQ 🙂 and Facebook (NASDAQ 🙂 all hit their lows.
The tech rebound also coincided with statements made by St. Louis Federal Reserve President James acknowledging recent spikes in inflation and interest rates, although fears of a sustained pickup in inflation were downplayed.
However, the faster pace of vaccine roll-out and ongoing reopening will fuel inflation and likely take interest in the ride, potentially keeping growth stocks in check.
“Well, inflation in the reopening sensitive sectors should prove temporary. A more sustained inflationary spike will take shape from 2021, led by healthcare inflation and a multi-quarter past attributed to dollar weakness in goods.” Morgan Stanley (NYSE 🙂 said.
In other news, Imax (NYSE 🙂 rose 15% after the improved 2021 performance outlook offset mixed fourth quarter results.
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