By Mark DeCambre
U.S. stock indexes notched their best weekly gain since the November elections Friday, even though the latest update on employment showed a disappointing jobs gain in January, suggesting that recovery in the labor market is stalling.
How did stock benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.63% rose 92.38 points, or 0.3%, to close at 31,148.24, just shy of its Jan. 20 closing record at 31,188.38.
The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.23% gained 15.09 points, or 0.4%, to settle at 3,886.83, a fresh record, its seventh in the year to date.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.14% climbed 78.55 points to reach 13,856.30, a gain of 0.6%, also a new high – its eighth of the year.
On Thursday , the S&P 500 notched its sixth record close of 2021, while the Nasdaq registered its seventh record of the year so far, and the Dow finished just 0.4% off its all-time closing high. The small-capitalization focused Russell 2000 /zigman2/quotes/210598147/delayed RUT +1.63% climbed 1.8%, setting a record.
For the week, the Russell gained 7.6%, the Nasdaq added 6%, the S&P 500 index advanced 4.7%, and the Dow ended 3.9% higher.
What drove the market?
The U.S. Labor Department’s employment report showed 49,000 jobs were added in January, while the unemployment rate fell to 6.3% from 6.7%.
The results affirm the view that the recovery in the jobs market is stalling out amid the COVID-19 pandemic that has slammed the U.S. economy. Some 10 million jobs that vanished in the early stages of the pandemic still haven’t returned.
“By looking at the US [nonfarm payrolls] data, it is clear that massive strength that we have seen previously in a lot of areas in no longer there,” wrote Naeem Aslam, chief market analyst at AvaTrade. “This means that the US lawmakers can push really hard for the next second stimulus package,” he wrote after the labor data was released.
The January report follows a reading from December that showed that 140,000 jobs were lost, marking the first monthly decline in employment figures in about eight months when the COVID-19 pandemic first walloped the country.
The January report comes as many states reimposed business restrictions at the end of last year to combat the pandemic and restaurants and hotels had to lay off workers, some for the second or third time.
The state of employment is likely to be even worse than the labor report for last month reflects, economists say. Several million people who dropped out of the labor force, bringing the unemployment rate lower, did so because they couldn’t find work and thus aren’t counted in the main unemployment rate.
Still, investors appeared upbeat on the basis of healthy earnings from American corporations in the second-busiest week of fourth quarter reporting season results, along with prospects for Congress passing President Joe Biden’s $1.9 trillion coronavirus relief package, using a special reconciliation procedure.
The Senate early Friday approved a budget resolution, 51-to-50, that would allow for a fast tracking of the $1.9 trillion coronavirus relief plan.
One benefit of the softer employment data is that it could enhance the prospects for further fiscal spending under Biden.
“The biggest risk with the nonfarm payroll report was a strong rebound in hiring that could diminish the prospects of future fiscal stimulus,” wrote Edward Moya, senior market analyst at Oanda, in a research note.
He notes that the slowness of the current recovery remains a key concern, as well as a sluggish bounceback that would have lingering impacts on parts of the economy.
“Economic scarring is happening as the number of long-term unemployed continues to stay at around the 4 million level,” Moya wrote.
Fears of a market correction that took hold last week, inspired by a Reddit-led group of individual investors, has given way to fresh gains for stocks. The rally for the major benchmarks now puts them on track for their best weekly gains in about three months, FactSet data show.