Monday August 9th

9-08-2021

Stock futures are mostly lower after Dow closes at record Friday

U.S. stock index futures traded mostly lower early Monday after the Dow Jones Industrial Average notched a record close Friday following a stronger-than-expected jobs report. Futures tied to the Dow fell 94 points, or 0.3%. S&P 500 futures lost about 0.15%. Nasdaq 100 futures were up about 0.1%. Tesla shares gained 1% in premarket trading after Jefferies upgraded the stock and predicted a rally of more than 20% over the next 12 months. Berkshire Hathaway’s B shares climbed more than 1% in premarket trading on the back of a solid earnings report. The conglomerate’s operating income jumped 21% year over year to $6.69 billion in the second quarter as its myriad of businesses from energy to railroads benefited from the economic reopening. Oil prices dropped on Monday, building on last week’s losses, as rising Covid cases caused concern of a slowdown in demand. West Texas Intermediate crude futures declined more than 4% to trade at $65.50 per barrel. The contract traded as low as $65.15 earlier in the session. International benchmark Brent crude declined 3.8% to $68.01 per barrel. The moves in futures trading came after the Dow rose 144.26 points, or 0.4%, to close at an all-time high of 35,208.51. The S&P 500 rose 0.17% to reach its own record close of 4,436.52. The Nasdaq Composite bucked the trend, dipping 0.4% to 14,835.76. All three major indexes ended the week higher and saw their second positive week in three. The Labor Department’s jobs report Friday showed the U.S. economy added 943,000 jobs in July. Economists expected 845,000 new jobs last month, according to Dow Jones estimates. The unemployment rate dropped to 5.4%, below the expectation of 5.7%. “You saw a lot more jobs being created in those areas that are reopening — restaurants, hotels, logistics, transportation,” Raymond James Chief Investment Officer Larry Adam said. “That’s a good sign. I think that puts more spending power behind the consumer going forward and I think that that’s ultimately a good thing for the economy.” However, the signs of a strong economic recovery could prompt the Federal Reserve to pull back its monetary support measures and prepare to begin tapering its bond-buying program. “If it does continue to this magnitude, that probably does bring the Fed a little sooner into the game when it comes to tapering,” Adam said. U.S. senators reconvened Sunday to work toward the passage of a $1 trillion infrastructure bill, a top political priority of President Joe Biden. The bipartisan package is expected to have sufficient Republican support to pass this week in the Senate and move to the House for consideration in September. Earnings season continues this week with companies including Tyson Foods, AMC Entertainment, Coinbase, Lordstown  Motors, Bumble, Palantir, Disney, Airbnb and DoorDash set to report quarterly earnings. Credit Suisse on Monday initiated a 5,000 price target for the S&P 500 for the end of 2022, citing strong earnings. The firm kept its 4,600 target for 2021. “Over the past 5 quarters, analysts have significantly underestimated EPS, a trend we expect to continue,” Credit Suisse chief U.S. equity strategist Jonathan Golub told clients. “We see upside to estimates as empty shelves are restocked and pricing power is maintained. Consumer spending should improve as the unemployment rate drops further, accompanied by higher wages.” Investors are awaiting key inflation data scheduled for release this week. The consumer price index and the producer price index are scheduled to come out Wednesday and Thursday, respectively. Asia-Pacific markets broadly struggled for gains on Monday as investors kept an eye on the Covid-19 situation across the region while oil prices tumbled 3%. In South Korea, the Kospi index slipped 0.3% to 3,260.42. The Kosdaq finished near flat at 1,060. Meanwhile, Hong Kong’s Hang Seng index reduced earlier gains of near 1% to trade up 0.37% at 26,275.64. Chinese mainland shares traded higher: The Shanghai composite rose 1.05% to 3,494.63 while the Shenzhen component added 0.77% to 14,941.44. Markets in Japan and Singapore are closed for public holidays. Oil prices slid on Monday, building on last week’s steep losses, as rising Covid cases prompted fears of a slowdown in demand. West Texas Intermediate crude futures declined more than 4% to trade at $65.50 per barrel. The contract traded as low as $65.15 earlier in the session. International benchmark Brent crude declined 3.8% to $68.01 per barrel. Gold fell as much as 4.4% to a more than four-month low on Monday as robust U.S. jobs data stoked concerns of a sooner-than-expected interest rate hike, which could increase the opportunity cost of holding non-interest bearing bullion. Spot gold was down 1.4% at $1,738.53 per ounce by 0406 GMT, paring earlier losses. Prices touched $1,684.37, their lowest since March 31 earlier in the session, triggered by stop-loss selling. U.S. gold futures slipped 1.4% to $1,739.00.