The Dow and the S&P 500 index opened at record highs Friday after the monthly U.S. jobs report came in better than expected, as the economy attempts to rebound from the COVID-19 pandemic and shake off the resurgent delta variant.

What’s happening?

The Dow Jones Industrial Average
DJIA,
+0.39%

rose 125 points to 35,193, a gain of 0.4%, after touching an intraday record at 35,246.79.

The S&P 500 index
SPX,
+0.13%

added 7 points, or 0.2%, to 4,436, hitting an intraday recordhigh at 4,440.82.

The Nasdaq Composite Index
COMP,
-0.40%

slipped 18 points to 14,875, a decline of 0.1%.

On Thursday, the Dow industrials rose 271.58 points, or 0.78%, to finish at 35,064.25. The S&P 500 gained 26.44 points, or 0.6%, to close at 4,429.10 and the Nasdaq Composite advanced 114.58 points, or 0.8%, to end at 14,895.12, both setting fresh closing records.

Opinion: The S&P 500 looks strong—but these ‘internals’ are far less positive

What’s driving markets?

Stock-market investors digested the U.S. Labor Department employment report for July that showed that the U.S. economy added 943,000 new jobs in July, above forecast for 845,000, according to a Wall Street Journal survey of economists shows. That gain exceeds what was seen in June and offers some hope that the stalled employment recovery is regaining some steam.

The unemployment rate dropped to 5.4% from 5.9%, also surpassing expectations for a decline to 5.7%.

“The payroll number has beaten the drum a bit harder again and today we have a clear warning sign that excessive loose monetary policy is going to leave the town soon,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a note after the nonfarm-payrolls figures were released.

“The US NFP number has pushed the gold price sharply lower as traders believe that the fed will not maintain its current monetary stance—change is coming,” the analyst wrote.  

The July jobs data comes as businesses have been struggling with back-to-work plans due to the fast spread of the delta variant, which has been hitting the U.S. and other countries world-wide.

Some analysts took the report as giving credence to the Federal Reserve’s timeline to taper its quantitative-easing measures, or QE, or the $120 million a month bond-buying program that helped to ease tight financial conditions during the height of the pandemic turmoil back in March and April of 2020.

“We know that the Fed was looking for substantial progress in the labour market recovery and that it exactly what we appear to be seeing over the past two reports,” wrote Fiona Cincotta, senior financial markets analyst at City Index, in emailed remarks.

Aberdeen Standard Investments Deputy Chief Economist James McCann, in emailed comments characterized the jobs report as “strong,” and said “it is really going to cement the view that the Fed is not far off giving advance notice of a tapering announcement.”

Investors have speculated that the U.S. central bank may signal its intention to scale back its asset-purchases program at a monetary policy gathering in Jackson Hole, in northwestern Wyoming, by the end of this month.

Earlier this week, Federal Reserve Vice Chairman Richard Clarida, said the conditions for the first rate increase will be met “by year-end 2022” allowing for the first move in 2023. The Fed vice chairman said he sees the recent rise in inflation as “transitory.” But he added that the risks of higher inflation are greater than the risks of low inflation.

“Today’s better than forecast reading prompted bets that the Fed could look to taper support sooner,” Cincotta said.

“This week we have already seen Fed officials adopt a slightly more hawkish bias and that was before this upbeat report,” the analyst wrote.

What stocks are in focus?

Groupon shares
GRPN,
+2.64%

were surging 6.1% after the deals platform easily beat earnings forecasts.

Yelp
YELP,
+12.63%

shares jumped 13% after the online reviews site reported a surprise profit and a lift to its annual guidance.

Zynga
ZNGA,
-16.79%

stock was down 17% as the videogame publisher’s outlook overshadowed results that topped Wall Street estimates.

Novavax
NVAX,
-18.08%

shares slid 18% as the biotech reported a wider-than-expected loss on the quarter, and said it push back submitting its COVID-19 vaccine to the Food and Drug Administration for emergency use authorization until the fourth quarter.

How are other markets doing?

The yield on the 10-year Treasury note TMUBMUSD10Y, 1.286% rose more than 7 basis points to close at 1.28%. Yields and debt prices move in opposite directions.

The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.4%.

Oil futures CL00 traded 0.3% higher, while gold futures GC00 headed for a loss of more than 2%.

In European equities, the Stoxx Europe 600 SXXP rose 0.2%, while London’s FTSE 100 UKX, 0.15% also added 0.2%.

In Asia, the Shanghai Composite SHCOMP fell 0.2% and the Hang Seng Index HSI dropped 0.1%, while Japan’s Nikkei 225 NIK rose 0.3%.

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