Dow falls after big jobs report miss, tech stock gains limit losses

Finance

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Aug. 23, 2021.
Michael Nagle | Bloomberg | Getty Images

U.S. stock futures were steady in overnight trading on Thursday as investors geared up for August’s jobs report.

Dow futures rose just 6 points. S&P 500 futures gained 0.05% and Nasdaq 100 futures were flat.

On Thursday, the S&P 500 and Nasdaq rose to records on the back of better-than-expected jobless claims data. The initial filings for unemployment insurance fell to their lowest levels since March 2020.

The Labor Department reported first-time jobless claims totaled 340,000 for the week ended Aug. 28, compared with the 345,000 estimate.

The S&P 500 climbed 0.3%, hitting its 54th record closing high of 2021. The technology-heavy Nasdaq Composite rose 0.14% to close at an all-time high. The Dow Jones Industrial Average popped 131 points or 0.4%.

Investors are now looking ahead to August’s nonfarm payrolls report — released Friday morning — which could give clues about how fast the Federal Reserve will remove easy monetary policy. Economists polled by Dow Jones expect 720,000 jobs were added in the month, down from 943,000 jobs added in July.  The unemployment rate is expected to dip to 5.2%, compared to 5.4% in July.

Forecasts for the report are wide-ranging, from about 300,000 to 1 million.

“The payroll number could have a significant impact on the stock and bond markets primarily because it could again move the goalpost for the start of QE tapering by the Federal Reserve,” said Jim Paulsen, chief investment strategist for Leuthold Group. “Worries abound that the continued surge in the delta variant is weakening economic growth enough to force the Fed to back off tapering this year.” 

Fed Chairman Jerome Powell has emphasized the need for more strong jobs data before the central bank would start to unwind its massive bond-buying program.

The central bank will also be looking at whether there are tell tale signs that Covid impacted hiring and activity. The virus variant has been a wild card for the economy, and its impact could be a factor that sways the Fed as it considers the first step away from the easing policies.

“If the jobs number is substantially weaker than expected, any imminent tapering could be postponed causing a renewed drop in bond yields, a shift in stock market leadership away from small caps and cyclicals back toward technology and defensives, and perhaps a pullback overall for the stock market,” added Paulsen.

The S&P 500 and Nasdaq started September on a strong foot. The S&P 500 and the Nasdaq Composite have rise 0.6% and 1.3% so far this week. The Dow is about flat since Monday.

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