* Wall Street closes higher; Nasdaq out front
* Cons discretionary tops sector gainers; Materials weakest
* Dollar, crude rise; gold tumbles
* U.S. Treasury 10-year yield ~1.12%
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U.S. STOCKS GAIN: INVESTORS EYE STIMULUS AND BIDEN
ADMINISTRATION (1605 EST/2105 GMT)
Wall Street's major averages closed higher as investors
focused on the potential for heftier fiscal stimulus support
under a Democrat controlled White House and Congress rather than
dwelling on Friday morning's weaker than expected December jobs
"The market is now anticipating a massive amount of
stimulus, a CARES act part two and a massive infrastructure
program," said Robert Phipps, a director at Per Stirling Capital
Management in Austin, Texas citing the outcome earlier this week
of the Georgia runoff elections as well as the confirmation on
Wednesday of Joseph Biden as the next U.S. President.
"I also think the market is celebrating what everyone
expects will be a more predictable less chaotic Washington going
forward," he said.
On Friday, Nasdaq led gains among Wall Street's
three major averages, closing the session up 1%. Among the S&P
500's 11 industry sectors the biggest percentage gainers on the
day were consumer discretionary, up 1.8%, and real
estate, up 1.1%. The biggest consumer sector gainer
was Tesla, which closed up 7.8%.
For the week, the S&P 500 rose 1.8% while the Dow
added 1.6% and Nasdaq gained 2.4%.
Here is Friday's closing snapshot:
WITH THE ELECTION AND 'INSURRECTION' BEHIND, EARNINGS ARE
NEXT (1340 EST/1840 GMT)
With the U.S. presidential election, the Senate runoffs in
Georgia and what President-elect Joe Biden called a
"insurrection" on Capitol Hill now in the rear-view mirror, the
next thing on investors' minds will be the kickoff of the
fourth-quarter earnings season next week.
The quarterly reports will force a last look back at one of
the direst years for corporate profits in recent history even as
the market appears to suggest broad optimism about 2021.
Analysts expect a 9.8% year-over-year decline in Q4 earnings
for the S&P 500, according to Refinitiv. Excluding the energy
sector, the decline is expected to be a smaller 6.6%.
Fourth-quarter revenue for S&P 500 companies is projected to
fall 1.3%. Excluding energy, revenue is expected to rise 1.8%.
So far, companies are broadly exceeding expectations.
All 18 S&P 500 companies that have already reported Q4
results have surpassed analyst earnings estimates, according to
Refinitiv. That compares with a 75.5% average beat rate over the
past four quarters and a long-term average beat rate of 65.3%.
As for revenue, 88.9% of companies beat analyst expectations
compared with an average of 66.5% over the last four quarters
and a long-term average of 60.5%.
Going into earnings season, company pre-announcements on
expected earnings per share had skewed more upbeat than dour. Of
90 companies, 49 gave positive EPS pre-announcements and 41 gave
Next week will kick off with results from the
virus-decimated cruise industry as Carnival Corp is due
to report before the U.S. market open on Monday. The week will
end with reports from some of the country's biggest banks,
JPMorgan, Citigroup and Wells Fargo.
S&P 500: MORE SPIRITED ACTION APPEARS (1206 EST/1706 GMT)
The S&P 500 has certainly turned more spirited this
week. Indeed, measures of historical volatility had recently
become especially compressed, suggesting the SPX was ripe for
some form of breakout, one way or the other.
Thus, with this week's more than 1% advance, coupled with
now rising historical volatility, it may suggest the benchmark
index has the momentum to generate further short-term gains.
Indeed, last week, the SPX, at 1%, traded in its tightest
range as a percentage of the prior week's close, in more than a
year. Additionally, on December 29, daily Bollinger Band (BB)
width, a measure of historical volatility, also had fallen to
its lowest level in more than a year. (Click on chart below)
From these crushed levels, the SPX is gaining and daily BB
width is rising. And with this week's action, the SPX's weekly
range has increased to more than 4%, or its largest reading
since early November.
Thus, the transition to higher volatility on strength, can
tilt the SPX toward the potential for upside follow-through in
the shorter-term, before its renewed energy may then fade again.
Of note, from the daily BB width low in early December 2019, the
SPX was able to rally more than 4% over the next month.
Meanwhile, the VIX, the market's implied volatility
measure, appears to be at a critical juncture. It is once again
back down to flirt with 20.00, which has proven to be an
important swing level over the past year.
JOBS REPORT DEEP DIVE: A PONY IN THERE SOMEWHERE (1105
There's an old joke about a fool who was found digging
through a huge pile of manure. When asked why, he said "there's
got to be a pony in here somewhere."
But while the hotly-anticipated employment report was a
bummer at first glance, digging deeper into the data, well, it
was still mostly a buzz-kill.
The U.S. labor market lost 140,000 jobs in the
last month of 2020 according to the Labor Department, a downside
shock compared with the tepid gain of 71,000 analysts expected.
November's upward revision to 336,000 from 245,000 and the
unemployment rate holding steady at 6.7% provided
some cold comfort.
But the report marked the first decline since the recovery
began and provided a grim reminder that the workforce has only
reclaimed just over half of the 22.2 million jobs hemorrhaged in
March and April when the pandemic brought the U.S. economy to
"The fact that the economy still counts 9.8 (million) fewer
jobs than prior to the pandemic is appalling," writes Gregory
Daco, chief U.S. economist at Oxford Economics.
Adding salt to the wound, the ranks of the longer-term
unemployed are swelling. Americans out of work for 27 weeks or
longer account for the largest piece of the unemployment pie,
even as weekly initial jobless claims remain bruisingly high.
"The share of long-term unemployed continued its ascent,"
Daco added. "These scarring effects pose downside risks to the
recovery and could lead to elevated long-term unemployment and
weakened labor market attachment for years to come."
While the manufacturing, retail trade and business services
sectors added jobs, these gains were offset by crushing losses
in leisure & hospitality and education.
Customer-facing services jobs, typically at the low end of
the wage scale, continue to suffer the worst effects from
efforts to contain the resurgent coronavirus.
Evidence of this can be seen in the bump-up in year-on-year
average hourly earnings growth, from 4.4% to 5.1%.
"There's a belief that this is temporary," said Brian Price,
head of investment management for Commonwealth Financial
Network. "Hopefully this is the last phase and we'll see gradual
reopenings and those lower wage jobs come back online and we'll
see an improvement in future jobs reports."
And now for the ponies.
The labor market participation rate held steady at 61.5%.
While the rate is still depressed, at least it suggests more
Americans haven't grown so discouraged they've permanently
exited the labor market.
And finally, the persistent racial/ethnic unemployment gap
While white unemployment edged up to 6% from 5.9%,
unemployment among African Americans fell to 9.9% from 10.3% in
November, shrinking the gap there to 3.9 percentage points from
4.4 percentage points.
But, on the downside, the Hispanic jobless rate jumped from
8.4% to 9.3%.
While the report appeared to cause a brief pre-market paring
in stock futures, investors appeared to take the data in stride
by regular session morning trading. While the Dow was in the
red, the S&P 500 and the Nasdaq were in positive territory as
investors looked toward more stimulus and bet on imminent
"Markets are expecting a spring-loaded economic recovery,"
Price added. "That's what's driving the markets right now."
BULLS MOUNT ANOTHER CHARGE (1022 EST/1522 GMT)
Optimism over the short-term direction of the U.S. stock
market jumped to its 4th highest level of the past 2 years in
the latest American Association of Individual Investors (AAII)
Sentiment Survey. With this, both bearish and neutral sentiment
AAII reported that bullish sentiment, or expectations that
stock prices will rise over the next six months, jumped 7.95
percentage points to 54.03%. Optimism was last higher in
mid-November (55.84%), and is above its historical average of
38.0% for the ninth consecutive week.
Bearish sentiment ticked down 0.19 percentage points to
26.61%. Pessimism is below its historical average of 30.5% for
the ninth straight week.
Neutral sentiment plunged 7.7 percentage points to 19.4%.
With this fall, neutral sentiment is below its historical
average of 31.5% for 49th time in the past 52 weeks.
Of note, besides mid-November of this year, bullish
sentiment was last higher during two weeks in early to
mid-January 2018 (59.75% and 54.11%). The S&P 500 topped
on January 26, 2018, and promptly slid as much as 12% over the
next ten trading days.
With these changes, the bull-bear spread rose to +27.42 from
+19.28 last week:
WALL STREET FUTURES POINT TO OPENING GAINS DESPITE JOB
LOSSES (0907 EST/1407 GMT)
CME e-mini S&P 500 futures are suggesting an opening
gain for the S&P 500 index. This after data showed that
the U.S. economy shed jobs for the first time in eight months in
December as the country buckled under an onslaught of COVID-19
infections, suggesting a significant loss of momentum that could
stall the pandemic recovery.
While economists polled by Reuters had expected the economy
to add jobs, non-farm payrolls decreased by 140,000 jobs last
month, the Labor Department said on Friday.
However, November payrolls were revised up to show 336,000
jobs added instead of 245,000 as previously reported.
While strategists said they were disappointed by the
December number, Steven Ricchiuto, U.S. chief economist at
Mizuho Securities USA LLC in New York suggested that the market
reaction could be tempered by hopes for additional fiscal
stimulus aimed at bolstering the weak economy.
“I don't think you really have a negative equity market
environment on this," he said. "People are going to say the
federal government is going to step up to the plate before the
$2,000 checks are issued and what else they can throw on top of
that in the new Congress to throw additional support behind this
thing is going to be the driving motivation and that's what the
markets is going to bet on today."
Meanwhile, Congressional Democrats were weighing impeaching
U.S. President Donald Trump for an unprecedented second time
after his supporters, inflamed by his false claims of election
fraud, stormed the U.S. Capitol.
Here is your premarket snapshot:
(Sinéad Carew, Herbert Lash)
FOR FRIDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT -
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)