U.S. Stocks Close Higher as Investors Digest Jobs Report

By Anna Hirtenstein and Karen Langley

Stocks ended Friday with weekly gains as investors looked past signs of economic weakness to focus on prospects for additional fiscal stimulus.

Major indexes had rallied for much of the week, closing at records Thursday and Friday, as Democratic victories in Georgia runoff races raised the likelihood of increased government spending to support the economy.

Friday brought another indication of how the coronavirus has weighed on businesses and workers with the December jobs report showing the U.S. shed 140,000 jobs and ending seven months of job growth.

Nevertheless, the S&P 500 added 0.6%, while the tech-heavy Nasdaq Composite rose 1%. The Dow Jones Industrial Average edged up 0.2%, or 57 points, held back in part by a decline in shares of industrial conglomerate 3M.

"So far investors continue to look beyond the weakness of this report and other economic data because they're confident that more fiscal stimulus is coming," said Michael Arone, chief investment strategist at State Street Global Advisors. "And that as the vaccine gets distributed, that this will only be temporary and we'll be able to push beyond the weakness of this number hopefully in the not too distant future."

Democratic victories in Georgia this week mean the Senate will be evenly split between the two political parties, with Vice President-elect Kamala Harris serving as a tie-breaker vote. The outcome has bolstered expectations for fresh stimulus measures to provide support to American households and businesses as the coronavirus pandemic continues to restricts work and social activity.

"We believe that this is a very sweet spot, from a political point of view, for the market," said Stephane Monier, chief investment officer at Lombard Odier. "The new U.S. administration will differentiate itself from the previous one by being consistent, as opposed to unpredictable, with a focus on international cooperation, instead of being isolationist."

The Democrats' narrow majority in the Senate may also limit Mr. Biden's ability to push measures such as higher corporate taxes and increased regulation, Mr. Monier added. "This is good for risky assets, and especially the stock market," he said.

The economically-sensitive energy, materials and financial sectors are the top-performing groups in the S&P 500 for the week, suggesting investors have been raising their outlooks for the recovery.

The stock market notched its recent gains despite political unrest in Washington, with rioters breaching the U.S. Capitol on Wednesday after President Trump urged supporters to pressure Congress to overturn Mr. Biden's win.

The coronavirus pandemic, meanwhile, continues to spread. The U.S. set a new single-day record for reported deaths associated with Covid-19, with more than 4,000 deaths reported Thursday.

"When you look around, there's a lot of bad news," said Brad McMillan, chief investment officer at Commonwealth Financial Network "You have pandemic case growth still extraordinarily high, you have political turmoil, you have the economy slowing significantly. But at the same time, there's reason to believe if this isn't as bad as it gets, we're at least getting very close, and we can legitimately expect improvement over the next three to six months, big improvements. And that's what the market is seeing."

Among individual stocks, 3M shares dropped 1.9% after a downgrade by Bank of America that cited risks related to environmental regulation as Democrats take control of the Senate.

Tesla shares climbed 6.4%, rising for an 11th consecutive day. The stock's rally on Thursday allowed Chief Executive Elon Musk to surpass Amazon.com founder Jeff Bezos as the world's richest person.

"What's happening now is you're getting an awful lot of day traders trading into it, and it continues to go higher," said Michael Hewson, a chief markets analyst at CMC Markets. "The electric vehicle space is getting hotter and the Democrats now have a better opportunity to pass some of their green deal, it means more money will be thrown at it."

In bond markets, the yield on 10-year U.S. Treasurys continued to rise for the fourth straight day. The yield advanced to 1.102%, from 1.070% on Thursday.

Overseas, the pan-continental Stoxx Europe 600 rose 0.7%. Among European equities, Credit Suisse fell 3.6% after the Swiss bank said an $850 million legal charge would push it into a net loss for the fourth quarter.

In Asia, most major benchmarks closed up, ending the week on a high note. South Korea's Kospi index jumped nearly 4% to a record high. Index heavyweight Samsung Electronics leapt more than 7% after forecasting a 25% rise in quarterly operating profit.

Japan's Nikkei 225 index rose 2.4% to hit the highest level since 1990, led by chip maker stocks, after the Japanese government declared a new state of emergency in Tokyo to try to control the spread of Covid-19.

Write to Anna Hirtenstein at [e-mail] and Karen Langley at [e-mail]

(END) Dow Jones Newswires

01-08-21 1619ET