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Jobs Report Helps S&P Stop a Two Week Slide, Yields Continue to Rise

Weekly Update – March 05, 2021

  • The S&P 500 index rose 0.8% last week thanks to a Friday jump on better-than-expected February jobs data that helped the market reverse losses posted earlier in the week.
  • The market benchmark ended the week at 3,841.94, up from last Friday’s closing level of 3,811.15.
  • As of Thursday’s close, the index appeared headed for its third consecutive weekly decline amid worries about the potential impacts of rising bond yields. However, a 2% Friday increase in the S&P 500 lifted the index into the black for the week.
  • The February jobs data released Friday by the Labor Department showed some 379,000 jobs were added last month, much better than the Econoday consensus estimate for just 175,000 additions. January’s job additions were boosted to 166,000 from a previously reported 49,000. Also, the unemployment rate edged down to 6.2% from 6.3% a month prior; the consensus estimate had been for the unemployment rate to stay at 6.3%.
  • The week’s previous declines came as bond yields continued to climb and comments by Federal Reserve Chairman Jerome Powell failed to ease investors’ worries about the rising yields. In comments Thursday, Powell said the central bank’s policy stance is appropriate, disappointing investors who had been hoping he would hint toward efforts to contain yields.
  • The rising bond yields are thought to be a reflection of an improved outlook as COVID-19 cases, hospitalizations and deaths have fallen since January and vaccinations have been increasing, but investors worry that higher yields would weigh on consumers’ and businesses’ ability to borrow.
  • Still, amid the better-than-expected jobs data, all but three S&P 500 sectors ended the week in positive territory. The energy sector had the strongest increase of the week, up 10%, followed by a 4.3% rise in financials and a 3.1% increase in industrials. The three sectors in the red were consumer discretionary, down 2.8%, and real estate and technology, down 1.4% each.
  • The energy sector’s climb came as crude oil futures rose on the week. Among the gainers, shares of ONEOK (OKE) jumped 12% as Credit Suisse boosted its price target on the stock to $49 per share from $44. The firm kept its investment rating on the stock at neutral.
  • Weighing on the consumer discretionary sector, shares of Target (TGT) shed 5.9% this week despite the retailer’s report of year-over-year increases in fiscal Q4 adjusted earnings per share and revenue that topped analysts’ expectations, as investors questioned whether a plan to invest about $4 billion annually over the next few years to accelerate new store openings and remodels and further scale up its operations may be too aggressive.
  • The decliners in consumer discretionary also included Ross Stores (ROST), whose shares fell 3% on the week as the off-price retailer reported fiscal Q4 earnings per share and revenue below year-earlier results and analysts’ mean estimates. The company also forecast EPS for the 13 weeks ending May 1 below the Street view.
  • Next week, economic data will be light earlier in the week, with just wholesale inventories due Monday and the National Federation of Independent Business small-business index due Tuesday. The consumer price index and federal budget are due Wednesday, followed by weekly jobless claims Thursday and producer prices and consumer sentiment Friday.

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