The United States Department of Labor reported Friday the economy added 943,000 jobs last month and that the unemployment rate fell to 5.4%, from 5.9% in June. The report was stronger-than-expected, as markets were estimating job gains of around 845,000 and an unemployment rate of 5.7%. Leisure and hospitality led the growth, with gains of 380,000 in that sector. Local government education and professional and business services also saw notable gains.
Wall Street seemed to take the jobs data as a Goldilocks report – strong enough to show solid growth and an economy that has traction – but not so strong that it would be likely to force the Federal Reserve to move up its timetable for tapering or interest rate hikes. Stock prices reacted positively to the numbers, with the both the Dow Jones Industrial Average and Standard & Poor’s 500 Index gaining ground after the release of the report on Friday, and finishing the week at record highs.
For the week as whole, the three major indices all finished with moderate/decent gains. The Dow rose .8% to 35,208.51 – the S&P 500 added .9% to 4,436.52 – and the NASDAQ Composite increased 1.1% to 14,835.76. The stock market was able to shrug off concerns over a rising number of Covid cases and the Delta variant, not only because of the strong jobs data (the 5.4% unemployment rate is a new pandemic low), but also because second quarter earnings reports continue to come in ahead of expectations.
According to data from FactSet – with 89% of S&P 500 companies reporting actual results, 87% have reported a positive EPS (Earnings Per Share) surprise and 87% have reported a positive revenue surprise. If 87% is the final number for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking the metric in 2008.
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