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Strong Jobs Report Sends S&P to New High with the Financial Sector Gains

Weekly Update – August 06, 2021

  • The S&P 500 index rose 0.9% this week, hitting fresh records in a broad climb led by the financial sector as most quarterly earnings results continued to come in above expectations and July payrolls showed stronger-than-anticipated job growth.
  • The market benchmark ended the week at 4,436.52, up from last Friday’s closing level of 4,395.26 and marking its highest closing level ever. The index, which also reached a new intraday high Friday at 4,440.82, is now up 18% for the year to date.
  • The week’s gains more than erased last week’s 0.4% decline, which had come amid concerns that the economic recovery may be slowing, especially amid impacts from the delta variant of COVID-19. However, investors shifted their focus this week back to corporate earnings results and economic data, where they found signs of hope.
  • Friday, the Labor Department’s jobs report for July showed nonfarm payrolls rose by 943,000 last month, topping June’s revised level of 938,000. Analysts polled by Econoday had been expecting an increase of 900,000. The US unemployment rate fell by 0.5 percentage point to 5.4% in July, better than the 5.7% rate expected, while the labor force participation rate and the size of the labor force grew.
  • The financial sector had the largest percentage increase of the week, up 3.6%, followed by a 2.3% rise in utilities. Technology climbed 0.9% while communication services and health care added 0.7% each. Just one sector ended Friday’s session in the red versus last week: consumer staples, which edged down 0.5%.
  • Among the financial sector’s gainers, shares of Franklin Resources (BEN) climbed 7.1% on the week as the investment firm reported fiscal Q3 adjusted earnings per share and revenue that were up year on year and above Street views.
  • In the utilities sector, American Water Works (AWK) shares rose 4.3% as the water and wastewater utility company reported Q2 earnings per share above year-earlier results and analysts’ expectations.
  • On the downside, the decliners in consumer staples included Clorox (CLX), whose shares fell 10% as the consumer products company released disappointing fiscal Q4 results and fiscal 2022 guidance. The company’s fiscal Q4 sales dropped 9% amid a pullback in consumer demand for cleaning supplies. It projected more declines in fiscal 2022 and issued earnings guidance for the fiscal year below analysts’ expectations.
  • Next week’s lineup of companies releasing quarterly results includes Tyson Foods (TSN), eBay (EBAY), DoorDash (DASH) and Airbnb (ABNB).
  • The schedule of economic data to be released next week features preliminary reports on Q2 productivity and unit labor costs on Tuesday, the July consumer price index on Wednesday, the July producer price index on Thursday, and the University of Michigan’s early August reading on consumer sentiment on Friday.
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