Such discouraging numbers could be fodder for critics of the stock market, who say prices have soared too high and look too expensive. But several analysts said they expect investors to continue to focus on hopes for a brighter future as temperatures warm and more people get vaccines.
“Further, a bleaker than expected jobs report translates into a greater likelihood for a full-throated stimulus package, which perversely acts as a tailwind for the market,” said Mike Loewengart, managing director of investment strategy at E-Trade Financial.
Stocks of companies that would benefit in particular from a healthier, reopening economy were leading the way.
Smaller companies were jumping more than the rest of the market, as they often do when investors are upgrading their expectations for the economy. The Russell 2000 index of small-cap stocks rose 2 per cent, continuing its much better performance than the big stocks in the S&P 500 so far this year.
Airlines, oil producers and cruise-ship operators were also clawing back more of their steep losses from last year, when sales for many of them suddenly vanished because of the pandemic.
Delta Air Lines rose 3.4 per cent even though it said it lost more money during the last three months of 2020 than analysts expected. The airline said it sees business turning higher through 2021 as vaccinations become more widespread and offices reopen. By the northern hemisphere spring, it expects to stop burning more cash than it brings in.
A bleaker than expected jobs report translates into a greater likelihood for a full-throated stimulus package, which perversely acts as a tailwind for the market.
E-Trade Financial’s Mike Loewengart
Poshmark surged 130 per cent in its initial public offering, which was priced at $US42 per share. The company connects buyers and sellers of secondhand fashion and home decor online. Petco, whose stores sell pet food and sometimes have veterinary hospitals, surged 56 per cent in its first day of trading after its shares priced at $US18.
Longer-term Treasury yields were inching higher or holding steady. The yield on the 10-year Treasury rose to 1.09 per cent from 1.07 per cent late on Wednesday.
It’s been climbing sharply recently on expectations that COVID-19 vaccines and the soon-to-be Democratically controlled Washington will lead to more federal borrowing, economic growth and inflation. The 10-year yield was at 0.90 per cent less two weeks ago, before two runoff elections in Georgia gave control of the Senate to Democrats.
One concern in the market has been about how much higher yields can go before upsetting the stock market. Low rates have been one of the main underpinnings for the market’s march to records even though the economy is still struggling.
“If interest rates continue to go higher, that could put a damper on the entire market,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
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Low rates mean bonds are paying less in interest, which can push some investors away from bonds and into stocks. They generally make investors more willing to push prices for stocks up even faster than their earnings are rising. Now, investors are paying the highest prices since the dot-com bubble was deflating in 2000 for S&P 500 stocks versus their earnings over the prior 12 months.
That has investors waiting to hear from the Federal Reserve, which has said it plans to keep short-term rates low even after inflation rises passes its 2 per cent target. Federal Reserve Chair Jerome Powell said Thursday afternoon policy makers won’t raise interest rates unless they see troubling signs of inflation.
In European stock markets, indexes were also pushing higher. Germany’s DAX returned 0.4 per cent, and France’s CAC 40 added 0.3 per cent. The FTSE 100 in London added 0.8 per cent.
In Asia, Japan’s Nikkei 225 rose 0.8 per cent after a report showed strong growth in machinery orders in December, suggesting robust corporate spending despite a marked worsening of the pandemic.
South Korea’s Kospi inched up 0.1 per cent, Hong Kong’s Hang Seng rose 0.9 per cent and stocks in Shanghai fell 0.9 per cent.
AP
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