The Nasdaq closed Friday at a fresh record but Wall Street’s main indexes headed into the Labour Day weekend in mixed fashion, reacting to a disappointing U.S. jobs report which raised fears about the pace of economic recovery but weakened the argument for near-term tapering. The TSX ended modestly higher, ending the week at another record.
The S&P/TSX Composite Index closed up 26.31 points, or 0.13%, at 20,821.43. The gains were primarily thanks to a jump in gold stocks, with the materials sector gaining 1.87%. Most other major sectors edged lower.
Gold advanced more than 1% to its highest in 2-1/2 months, as the weaker-than-expected U.S. jobs growth in August drove the U.S. dollar lower, casting doubts on the Federal Reserve’s tapering timeline. A weaker greenback makes bullion more attractive to international buyers.
U.S. gold futures settled 1.2% higher at $1,833.7.
“The knee jerk reaction was positive for gold as a big miss with the headline number pretty much ruled out a September taper,” said Ed Moya, senior market analyst at foreign exchange brokerage OANDA, putting it on course for a break toward $1,850.
Some investors view gold as a hedge against higher inflation that may follow stimulus measures, while lower interest rates reduce the opportunity cost of holding non-yielding bullion.
“Market focus will shift to the September FOMC meeting next. We continue to see further upside risk for gold in light of our expectations for the USD to weaken and real yields to remain deeply negative,” said Suki Cooper, precious metals analyst at Standard Chartered Bank.
Silver jumped 3.4% to $24.70 per ounce
The TSX energy sector gave back some of the previous day’s sharp gains, ending 0.4% lower along with a pullback in oil prices. U.S. crude oil futures settled down 1% at $69.29 a barrel.
The Bank of Canada is due to make an interest rate decision next Wednesday, while it will be a shortened week for domestic markets. The TSX is due to be closed on Monday for the Labour Day holiday.
On Wall Street, a majority of the 11 S&P sectors ended lower, with the energy and financial indexes among those finishing in the red.
Banking stocks, which generally perform better when bond yields are higher, dropped even as the benchmark 10-year Treasury yield jumped following the report.
“The number’s a big disappointment and it’s clear the Delta variant had a negative impact on the labour economy this summer,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“You can tell because leisure and hospitality didn’t add any jobs and retail actually lost jobs. Investors will conclude that perhaps this will put the (Federal Reserve) further on hold in terms of the timing of tapering. Markets may be okay with that.”
Among the biggest decliners on the S&P 500 were cruise ship operators, including Norwegian Cruise Line Holdings, Carnival Corp and Royal Caribbean Cruises, whose businesses are highly susceptible to consumer sentiment around travel and COVID-19.
The S&P 500 and the Nasdaq had scaled all-time highs over the past few weeks on support from robust corporate earnings, but investors have remained generally cautious as they watch economic indicators and the jump in U.S. infections to see how that might influence the Fed and its tapering plans.
The labour market remains the key touchstone for the Fed, with Chair Jerome Powell hinting last week that reaching full employment was a pre-requisite for the central bank to start paring back its asset purchases.
On Friday, the Labor Department’s closely watched report showed nonfarm payrolls increased by 235,000 jobs in August, widely missing economists’ estimate of 750,000. Payrolls had surged 1.05 million in July.
Despite a number well outside the consensus estimate, the overall reaction of investors was muted, continuing a trend over the last year of a decoupling of significant S&P movement in the wake of a wide miss on the payrolls report.
Unofficially, the Dow Jones Industrial Average fell 74.47 points, or 0.21%, to 35,369.35, the S&P 500 lost 1.41 points, or 0.03%, to 4,535.54 and the Nasdaq Composite added 32.34 points, or 0.21%, to 15,363.52.
The Nasdaq, registering a fifth daily gain in the last six sessions, was boosted by technology heavyweights, including Apple, Alphabet, and Facebook. Tech stocks tend to perform better in a low interest-rate environment.
Chinese ride-hailing firm Didi Global gained after a media report that the city of Beijing was considering moves that would give state entities control of the company.
Reuters, Globe staff
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