Stocks End Mixed, Tech Underperforms
4:59 pm Friday, August 06th, 2021
U.S. stocks closed mixed on Thursday, with cyclical sectors generally outperforming growth peers. The day’s main talking point was the July jobs report, which came in stronger than expected.
Briefly, nonfarm payrolls increased by 943,000 (consensus 925,000) on top of an upwards revision in June, the unemployment rate decreased to 5.4% (consensus 5.6%) from 5.9% in June, and average hourly earnings increased 0.4% (consensus 0.3%).
The report pointed to continued improvement in the labor market, which should make the Fed think about tapering asset purchases sooner rather than later. A pro-cyclical bias has emerged with the 10-yr yield up eight basis points to 1.30% and the financials (+2.0%), materials (+1.4%), and energy (+1.2%) sectors in the leadership positions.
More generally, value stocks are outperforming growth stocks, which are getting clipped by the jump in long-term rates. The Russell 1000 Value Index is up 0.7%, versus the 0.4% decline in the Russell 1000 Growth Index.
The information technology (-0.2%), communication services (-0.1%), and consumer discretionary (-0.8%) sectors, which contain the mega-cap growth stocks, are joined by the health care sector (-0.4%) in negative territory.
Biotechnology companies Moderna (MRNA), Illumina (ILMN) and Novavax (NVAX) were showing weakness today.
MRNA received two analyst downgrades to the equivalent of a Neutral rating. ILMN is down despite providing good earnings news. NVAX delayed its FDA application for its COVID-19 vaccine until the fourth quarter.
In other interesting moves, the U.S. Dollar Index has strengthened by 0.6% to 92.82, the CBOE Volatility Index (16.61, -0.67, -3.8%) has slipped below 17.00, and WTI crude futures are down 1.1% to $68.33/bbl despite the recovery optimism in the market.
