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Stocks Set New Highs with Strong Jobs Reports and the Fed Announces Tapering of Bond Buying Program

Weekly Update – November 05, 2021

  • The S&P 500 index rose 2% in the first week of November, setting new highs for the seventh session in a row as Q3 earnings continued coming in above analysts’ estimates while October jobs data also topped expectations.
  • The market benchmark ended Friday’s session at 4,697.53, up from last Friday’s closing level of 4,605.38 and marking its seventh consecutive record closing high in a row. The index is now up 25% for the year to date. The S&P 500 also reached a new intraday high Friday at 4,718.50.
  • The winning streak has come on better-than-expected Q3 results. While supply-chain challenges, the continuation of the COVID-19 pandemic and inflation concerns have persisted, in many cases these issues haven’t dented profits by as much as analysts and investors had feared.
  • Investors also received encouraging data on October employment last week. Wednesday, ADP data on the private sector showed a larger-than-expected increase in jobs last month. Thursday, the Labor Department reported a lower-than-expected number of jobless claims for last week that also reflected a fifth-consecutive decline in weekly jobless claims.
  • Friday, the Labor Department’s monthly report for October showed nonfarm payrolls rose by 531,000, which was more than the 450,000 jobs increase expected in a survey compiled by Bloomberg, while September payrolls saw a large upward revision to a 312,000 increase. The unemployment rate fell to 4.6% in October from 4.8% in September, compared with the 4.7% rate expected.
  • Also in focus last week, the Federal Reserve’s Federal Open Markets Committee announced that it would start tapering its bond-buying support program. The move had been widely anticipated, while the FOMC kept its benchmark lending rate near zero.
  • By sector, the consumer discretionary sector had the largest percentage increase of the week, up 5%, followed by a 3.3% rise in technology and a 3.2% boost in materials. There were just two sectors in the red for the week: Health care slipped 0.7% while financials edged down 0.6%.
  • The consumer discretionary sector’s gainers included shares of Under Armour (UAA), which raised its 2021 outlook for sales and earnings as demand for the athletics apparel brand was better than the company expected in the most recent period, driving a jump in year-on-year results. Shares jumped 14% on the week.
  • In technology, shares of Arista Networks (ANET) soared 30% as the networking technology company reported Q3 adjusted earnings per share and revenue above year-earlier results and analysts’ expectations and forecast Q4 revenue ahead of the Street consensus estimate at the time.
  • In the materials sector, DuPont (DD) shares climbed 16% as the technology-based materials company reported Q3 adjusted EPS and revenue above year-earlier results and analysts’ mean estimates and announced plans to acquire engineered materials company Rogers Corp. (ROG) for $5.2 billion. DuPont said the deal should improve its standing in advanced materials used in electric vehicles, advanced driver assistance systems, 5G telecommunications and clean energy. Shares of Rogers surged 34%.
  • On the downside in health care, Moderna (MRNA) shares fell as the COVID-19 vaccine maker reported Q3 sales and earnings that missed expectations and slashed its product sales projections for 2021. Moderna’s stock fell further on Friday after Pfizer (PFE) said its antiviral drug Paxlovid reduced the likelihood of death or hospitalization from the illness by 89%. Moderna’s shares ended the week down 31%.
  • Next week, the earnings calendar features Zynga (ZNGA), PayPal Holdings (PYPL), D.R. Horton (DHI), Wendy’s (WEN) and Walt Disney (DIS), among other companies reporting quarterly results.
  • Economic data next week are expected to include the October consumer price index and producer price index as well as a preliminary reading on consumer sentiment for November.

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