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Dow Joins S&P at Record Highs After Impressive Jobs Report

By Zacks Investment ResearchStock MarketsAug 06, 2021 09:15PM ET
Dow Joins S&P at Record Highs After Impressive Jobs Report
By Zacks Investment Research   |  Aug 06, 2021 09:15PM ET
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That’s the kind of jobs report that can reassure nervous investors about this economic recovery, which explains why the Dow joined the S&P at record highs on Friday. The NASDAQ didn’t come along for the ride but did have the best weekly performance of the three major indices.

The Government Employment Situation report for July slaughtered expectations. The economy added 943,000 jobs last month, which marks a substantial outperformance compared to forecasts in the mid-800Ks. Furthermore, the unemployment rate dipped all the way to 5.4% instead of the expectation at 5.7%.

The recovery names loved the print and moved higher in the session, while rising rates convinced investors to pull money out of tech. The result provided a mixed picture for Friday, but a positive outcome for the whole week.

The S&P rose 0.17% today to 4436.52, which marked its third record close in the past four sessions. The Dow advanced 0.41% (or about 144 points) to 35,208.51, its first new high since Monday, July 26. However, the NASDAQ’s four-day winning streak came to an end as it slipped 0.40% (or nearly 60 points) to 14,835.76.

The tech-heavy index may have hit a wall today in light of the strong jobs report, but it still added 1.1% for the whole week. Meanwhile, the S&P was up 0.9% over the five days and the Dow increased 0.8%. It was a nice comeback for all from last week’s losses.

So does this mean that the Fed will finally have to make some changes to their policies, even if investors kick and scream? Remember that on Monday, Fed Governor Christopher Waller opined that the central bank may want to make a taper announcement as soon as September if the next two jobs reports are strong. Well, that’s one down!

The next communications from the Fed will be very interesting. For today though, investors seemed more excited about the economic recovery than fearful of a taper. But that could change next week.

Speaking of next week, this solid earnings season will continue when we get back from the weekend. Approximately 80% of the S&P companies that have reported already beat both earnings and revenue expectations.

More than 650 companies will be reporting next week, including some big players like Disney (DIS) and eBay (NASDAQ:EBAY). By next Friday, we will have had results from more than 91% of S&P companies.

By the way, all of this data comes from our Director of Research Sheraz Mian, whose brand new Earnings Preview article is ready under the title “The 3 Most Notable Features of Q2 Earnings Season”.

Today's Portfolio Highlights:

Blockchain Innovators: Cloud services require blockchain technology, which means Sify Technologies (NASDAQ:SIFY) is a good fit for this portfolio. The company is one of India’s most comprehensive ICT solutions providers. More specifically, its GlobalCloudConnect platform offers services through the Oracle (NYSE:ORCL) Cloud. Dave appreciates SIFY’s rising earnings estimates and double-digit forecasts for earnings and revenue growth. Furthermore, estimates for fiscal 2022 are higher than they’ve ever been while the stock is well off its highs, which is a divergence that the editor loves to see. He added SIFY on Friday, while also selling Benefitfocus (NASDAQ:BNFT) after it slipped to a Zacks Rank #4 (Hold). Read the full write-up for more on today’s moves. In other news, this portfolio had a top performer today as ADTRAN (ADTN) rose 8.4%.

TAZR Trader: Shares of BigCommerce (BIGC) plunged more than 11% on Friday even though this software-as-a-service company beat on both the top and bottom lines in its recent quarterly report. In fact, it even offered a strong double-digit growth guidance. Therefore, Kevin decided to add a little bit more to this position on Friday, and there are a few positive notes from analysts to back up this decision. The editor added more to BIGC in May as well. The stock is currently the third best performer in the portfolio with a gain of more than 44% since inception, which means today’s pullback is a great opportunity. Read the complete commentary for more on this move, including insight from the analysts. By the way, this service also had a top performer today with Magnite (MGNI) rising 10.3%.

Surprise Trader: The portfolio is looking to develop a green thumb with today’s addition of GrowGeneration (NASDAQ:GRWG), an owner and operator of specialty retail hydroponic and organic gardening stores. As part of the Agriculture – Products space, its in the top 15% of the Zacks Industry Rank. Last quarter, GRWG blew the doors off earnings expectations by 42%, and now it has a positive Earnings ESP of 3.45% for the quarter coming before the bell on Thursday, August 12. Rising earnings estimates have made the company a Zacks Rank #2 (Hold), while growth estimates are strong on both the top and bottom lines for this year and next. The editor added GRWG on Friday with a 12.5% allocation and also sold Sonic Automotive (NYSE:SAH) for 7.6% in two weeks. Read the complete commentary for more.

Technology Innovators: Its been less than two months since Brian added Grid Dynamics Holdings (NASDAQ:GDYN), and the stock is already the third best performer in the portfolio. The position is up nearly 50% since being added on June 11. And on Friday GDYN was the biggest winner among all ZU names by gaining 15.7% after a solid second-quarter performance, which included a positive earnings surprise of more than 66% and revenue that beat expectations by nearly 14%. GDYN is engaged in architecting and delivering digital transformation programs principally in the retail, technology and financial sectors. This service also has the best performer over the past 30 days as Silicon Motion Technology (NASDAQ:SIMO) has jumped 30.7%.

Headline Trader: "This morning's remarkable July jobs data just abbreviated the market's projected timeline to full economic recovery. It appears that the Delta-variant isn't adversely impacting our economic recovery as much as the investors initially thought. I expect the US jobs market to continue accelerating in the coming months, with September being the decisive month to watch for as additional unemployment benefits expire federally on September 6th.

"According to the US Labor Department, the US economy is now only 5.41 million jobs away from reaching its pre-pandemic levels. Of the 22.1 million jobs lost at the trough of 2020's medically induced economic coma last March, more than 75% of them have been recovered. The Fed is running out of excuses for delaying the cut back of its record $120 billion monthly asset purchases ($80 billion in T-bills & $40 billion in MBSs)."
-- Dan Laboe

Have a Great Weekend!
Jim Giaquinto

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Dow Joins S&P at Record Highs After Impressive Jobs Report

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Dow Joins S&P at Record Highs After Impressive Jobs Report

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