Last checked at 
* S&P 500, Dow, Nasdaq finish up ~1%; Russell 2000 gains ~2%
* S&P 500, Nasdaq, Russell 2000 end at fresh record highs
* Financials lead S&P sector gainers; materials sole loser
* Dollar, crude up, gold tumbles
* U.S. 10-Year Treasury yield ~1.14%
Feb 4 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
U.S. STOCKS RALLY WITH EARNINGS IN FULL SWING, JOBS NEXT
(1605 EST/2105 GMT)
Wall Street closed higher on Thursday with the S&P 500
, Nasdaq and the small cap Russell 2000 all
boasting record closing highs for the first time since late
January. This as earnings season raged on, and investors watched
for stimulus progress, just ahead of the January jobs report due
out on Friday morning.
The S&P, Nasdaq and the RUT also boasted intraday records on
Thursday. The RUT also significantly outperformed the large cap
indexes with a near 2% gain, while the S&P, Nasdaq, and Dow
each rose just a little more than 1%.
The morning's data bolstered the mood with the number of
Americans filing new applications for unemployment benefits
decreasing further last week and suggesting a stabilizing labor
market as pandemic-related restrictions loosened.
Also U.S. private payrolls rebounded more than expected in
January, according to The ADP National Employment Report
released on Wednesday.
Citing the data so far this week BNY Mellon Pershing
Lockwood Advisors, Chief Investment Officer, Matthew Forester
told Reuters' Aleksandra Michalska "the whisper number for the
non-farm payrolls has now climbed over 100,000. We were at about
70,000 for consensus earlier this week."
While he said anything less would be disappointing, "given
the tone of the recent macro data," Forester is hoping for a
"number that might show us turning a little bit of a corner on
the labor front."
While the S&P and the Nasdaq boasted their first record
closes since January 25, the RUT's last record close was on
January 22.
Among the S&P's 11 major sectors, financials led the
percentage gainers with information technology next in
line. Materials finished as the sole loser.
Here is your closing snapshot:
(Sinéad Carew, Aleksandra Michalska)
*****
INCHING BACK TO NORMAL: PANDEMIC RECOVERY SOLDIERS ON (1344
EST/1844 GMT)
The United States is gaining ground in its pandemic
recovery, with health conditions and strengthening demand
leading the charge.
Global financial information firm Oxford Economics (OE) is
out with its most recent Recovery Tracker, which shows a robust
2 percentage point gain to 79% of 'normal.'
OE follows 23 discrete metrics and groups them into six
baskets: financial, mobility, production, employment, demand,
and health.
For the week ended January 22 - the most recent data point
available - an accelerated vaccine rollout helped the health
tracker jump by 11.5 percentage points to 38.1%, aided by
falling positive COVID-19 test rates, while demand strengthened
by 1.2 percentage points due to increasing credit card outlays.
These gains were mitigated by drops in mobility (down 1.8
percentage points), financial conditions (falling 1.4 percentage
points), and production (off 0.4 percentage points).
The employment tracker was unchanged as lower jobless claims
were offset by a rise in internet searches for "unemployment
insurance."
"The recent upturn in our Recovery Tracker suggests the
recent soft patch was short," writes Gregory Daco, chief U.S.
economist at OE. "We expect the economy will grow 5.9% in 2021
as accelerating vaccine distribution and an improved health
situation support a summer mini-boom in activity."
The chart below, courtesy of OE, shows a history of the
recovery tracker broken down by its six major components:
(Stephen Culp)
*****
LOOKING BACK FOR THE FUTURE (1316 EST/1816 GMT)
While strategists are always quick to point out that every
business cycle is different, they love to look to the past for
patterns that might repeat.
DataTrek's comparison of 2009/2010 trends with today, is
such an effort and comes with a caution sign.
According to co-founder Nicholas Colas, the 2009/2010
playbook says a pullback is coming. His research involves
comparing the S&P performance after the March 9 2009 low to its
performance following the March 23 2020 low.
Colas graphed the comparison, with orange and blue lines for
2020 and 2009/2010 respectively, and noticed that when the 2020
trend ran ahead of the 2009 experience it "invariably pulled
back" and when 2020 lost some of its courage it soon managed to
return to the 2010 pathway.
As of Wednesday's close - 219 trading days after the spring
lows - the S&P 500 was 71% off the March 23rd, 2020 close, he
notes, and on the 219th trading day after the March 9th, 2009
low, the S&P was up 70%.
"Yes, we know. It’s creepy…" wrote Colas.
So with a warning sign flashing at this point of the graph,
he asked history what we should expect next. In 2009 he saw a
textbook pullback over 13 trading days that shaved 8.2% off the
index. But then he notes that the S&P then recovered in the
following 30 trading days and ended March 2010 at new highs.
However, before you start worrying about the creepy spirits
at work, Colas says its just "an illustration of what happens as
we get deeper into a cyclical recovery."
He also notes that 2020 did diverge from 2009 several times,
and says 2021 might well do the same. But with many market
observers actually looking for a pullback, the comparison could
provide suggestions for "what to expect and where to start
buying."
Here is a snapshot of Colas orange line/ blue line graph:
(Sinéad Carew)
*****
BANKS LIFT EUROPE TO 4TH STRAIGHT SESSION OF GAINS (1237
EST/1737 GMT)
The pan-European STOXX 600 index has signed off a fourth
straight session of gains with a 0.6% rise, setting it on course
for weekly gains of 3.4%.
If that still holds on Friday evening, it would be its best
week since November.
U.S. stimulus optimism played its part but there was plenty
of good news propping up European banks with their index jumping
about 2.6%.
Notably, the BoE saying British lenders would need at least
six months to prepare for negative rates was a clear boost to
the sector which rose 2.8%. Natwest and Lloyds
rose well over 5%.
In Italy, banking stocks were also on the rise and enjoying
watching former ECB head Draghi attempting to build a coalition.
Also on the bright side, Deutsche Bank eked out a
small profit in 2020 after five years of losses.
While it didn't do much good to the German giant's shares,
which closed down 0.3%, there was a positive read across for the
sector.
The best performing banking stock was BBVA, up 7.5% and
seemingly still very popular after announcing last week a share
buyback plan and its intention to resume paying dividends.
Among losers, Unilever stood out with a 6.2% fall
after it underwhelmed investors with disappointing sales
targets.
Another underperformer of the earnings season was ABB, down
5%. The Swiss group was also criticised for its outlook
announced after a surprise Q4 loss.
(Julien Ponthus)
*****
UFO: IN ORBIT ON THE CHARTS (1137 EST/1637 GMT)
Space-related stocks have been on a rocket ride of late.
Indeed, the Procure Space ETF has outperformed so far in
2021 with a more than 16% thrust vs the S&P 500's rise of
only around 2.5%.
Indeed, there appears to be growing enthusiasm for "final
frontier" stocks. This, despite the recent news that a prototype
of a Starship rocket developed by SpaceX, billionaire
entrepreneur Elon Musk's private space company, exploded during
a landing attempt minutes after a high-altitude experimental
launch on Tuesday, in a repeat of an accident that destroyed a
previous test rocket.
In any event, this did not deflect enthusiasm for UFO, which
has hit fresh record highs Thursday:
This week, the ETF broke above its $29.03 February 2020 top,
and has extended as high as $29.77. There is a channel
resistance line, however, around $29.70, which may hinder
strength. The resistance line across highs from mid-2019 now
comes in around $31.65, or nearly 7% above current levels.
As of January 31, UFO's top holdings included Iridium
Technologies, Virgin Galactic, and Gilat
Satellite.
Virgin Galactic has been especially strong this year, with a
gain of more than 130%. In fact, SPCE shares have
more than doubled since ARK Investment Management filed on
January 13 for a space exploration ETF.
That said, after spiking to a fresh intraday record in early
trade Thursday, SPCE is now down 2% on the day.
(Terence Gabriel)
*****
LAYOFFS PERSIST, LABOR COSTS RISE, BUT FACTORY ORDERS
INCREASE (1100 EST/1600 GMT)
Data released on Thursday revealed an economy still
hemorrhaging jobs a year into the pandemic recession, with
factory orders and labor costs heating up amid ongoing vaccine
deployment.
The number of U.S. workers filing first-time applications
for unemployment benefits fell last week to 779,000
according to the Labor Department, 51,000 fewer than economists
estimated.
While any decrease is welcome news, jobless claims have
stubbornly remained above 665,000 - the nadir of the Great
Recession - for coming up on a year.
"Additional fiscal stimulus and broader vaccine diffusion
will put the labor market on a better footing around mid-year,"
writes Nancy Vanden Houten, lead U.S. economist at Oxford
Economics (OE). "But in the near term, we expect jobless claims
to remain elevated by historical standards as the pandemic
continues to restrict activity."
Continuing claims, reported on a one-week lag,
dropped by 193,000 to 4.592 million.
The data sample was taken after the survey period for the
Labor Department's comprehensive employment report expected on
Friday.
The Commerce Department piped in today, with its
announcement that factory orders rose by 1.1% in
December, faster than the 0.7% anticipated but a slight
deceleration from November's upwardly revised 1.3% advance.
That advance was limited by a 51.7% plunge in commercial
aircraft orders, which, as addressed below in the Challenger
Gray report, contributed to the aerospace sector's spike in
layoffs.
The deceleration jibes well with the Institute for Supply
Management's purchasing managers' index released on Monday,
which showed the U.S. manufacturing sector's expansion losing a
bit of momentum.
The Labor Department also released fourth-quarter data on
labor costs and productivity.
The report showed labor costs jumped by 6.8% on a quarterly
annualized basis in the last three months of 2020, a reversal
from the third-quarter's 6.6% decline and a bigger increase than
the 4% consensus.
Productivity, on the other hand, fell more than expected,
dropping by 4.8%.
"The productivity and costs numbers have been so noisy since
Covid struck that the trend has been lost," says Ian
Shepherdson, chief economist at Pantheon Macroeconomics. "The Q1
numbers likely will be soft - though better than Q4 - and then
Q2 and Q3 should see a substantial post-Covid lift."
"This will drive down the rate of growth of unit labor
costs, which right now appear to be signaling big spike in
inflation," Shepherdson adds.
Finally, a report from executive outplacement firm
Challenger, Gray & Christmas revealed that pre-announced job
cuts by U.S. companies rose by 3.3% in January to
79,552.
Demand downturn was cited as the most common reason, and the
aerospace/defense sector, hit by drying up new orders referenced
above, was the hardest hit.
Year-on-year, January planned layoffs were 17.4% higher.
"While cuts were higher than average last month, we are
seeing a leveling off of announcements, which may bode well for
recovery in the coming months," says Andrew Challenger, senior
vice president at Challenger Gray. "Companies may be reassessing
their staffing levels and waiting on the impact of the relief
bill before making any additional workforce decisions."
Eyes now turn to the January jobs report due tomorrow
morning, which is expected to show a paltry 50,000 increase in
nonfarm payrolls, with the unemployment rate holding firm at
6.7%.
The dip in claims, along with a series of upbeat earnings
reports put investors in a buying mood in morning trading.
All three major U.S. stock indexes were modestly higher,
with small caps and some of the cyclicals out front.
(Stephen Culp)
*****
WALL STREET EDGES UP WITH STIMULUS, DATA IN VIEW (1010
EST/1510 GMT)
Wall Street's three major averages are modestly higher early
in Thursday's regular session as investors appear to be clinging
to stimulus hopes and economic data showed some promise.
On Thursday morning, data showed that the number of
Americans filing new applications for unemployment benefits
decreased last week, suggesting that the labor market was
stabilizing as authorities started to loosen pandemic-related
restrictions on businesses. The Labor Department said seasonally
adjusted initial claims were 779,000 for the week ended Jan. 30,
compared to 812,000 in the prior week and 830,000 applications
expected by economists polled by Reuters.
While U.S. worker productivity fell at its steepest pace
since 1981 in the fourth quarter, the trend remained solid as
the COVID-19 pandemic weighs heavily on less productive
industries like leisure and hospitality.
On Wednesday, the Democratic-controlled U.S. Congress worked
to pass President Joe Biden's $1.9 trillion COVID-19 relief
package without Republican support, as the White House said it
was flexible on a key element of the plan.
Earnings were a mixed bag with Qualcomm Inc shares
the biggest drag on the S&P after it said late Wednesday that
semiconductor supply constraints were hampering its sales
growth.
But PayPal Holdings Inc is the biggest boost after
it beat Wall Street estimates for quarterly profit on Wednesday,
with a coronavirus-driven shift to online shopping and digital
transactions driving record payment volumes.
The financial sector is the biggest percentage
gainer among the S&P's 11 major sectors, while materials
is the biggest decliner.
Here is your morning snapshot:
(Sinéad Carew)
*****
NASDAQ COMPOSITE: CRACK UNDER THE SURFACE? (0900 EST/1400
GMT)
The Nasdaq Composite ended just slightly lower on
Wednesday, finishing only around 25 points, or just 0.19%, below
its January 25 record-high close of 13,635.992.
Meanwhile, the Nasdaq New High / New Low (NH/NL) index
, a measure of internal strength, finished at its lowest
level in nearly 3 months:
On January 29, the Nasdaq NH/NL index ended a 46-trading-day
streak of greater than 90% readings. This was its longest such
streak since a 46-trading-day run from March 1 to May 4, 2010.
Of note, back then, once the streak ended, and with the NH/NL
index then deteriorating, the Composite ultimately collapsed
nearly 20% over the next 47 trading days.
Additionally, the NH/NL index's recent high, on January 21,
was 96.4%, or just decimals below the 96.6% high hit during the
2010 streak. As of Wednesday, the measure has now deteriorated
to 88.5%.
It now remains to be seen if the January 21 high marked a
momentum peak for this measure, and if the Composite simply
became so overheated that it is vulnerable to weakness.
Additionally, any new IXIC high, unconfirmed by the NH/NL
index, will start the clock ticking on a divergence pattern.
Just since early last year, periods of market instability were
preceded by this measure diverging from the Composite.
(Terence Gabriel)
*****
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
