Is the U.S job market finally in a consistent strong trend? It is too early to say this despite the big beat on this month’s non-farm payrolls. Which sent the U.S. stock market higher on Friday, March 5, 2021. The tech stocks continue to underperform and this week Nasdaq fell almost 2%, while both the Dow Jones and the S&P 500 moved higher. This divergence in the relative performance of major indices along with the path of long-term bond yields are two major themes that will be of top importance in 2021.

Surging oil prices may add significant inflationary pressures and with the price per barrel of oil above $66 this is negative news for a plethora of sectors, and industries where oil is one of the main sources of cost. But it is also good news for energy stocks. Airlines, industrial companies, should hedge this oil cost.

The trend of meme stocks continues to be present. I advise conservative investors and not just speculators to avoid these stocks. Stocks should move on actual catalysts such as earnings reports and not on stock manipulation and without arguments from social media forums or decisions based on the FOMO effect. This is gambling, not stock trading, and certainly not investing.

Economic News

Latest news important to mention here. The Senate passed the $1.9 trillion relief package which should be supportive for stocks, at least temporarily. Janet Yellen said that higher Treasury yields signal recovery, and not inflation. She mentioned “I don't see that the markets are expecting inflation to rise above the 2% inflation objective that the Fed has as an average inflation rate over the longer run," and that the United States needs faster job growth, a factor we have mentioned before. Whether the United States could reach the target of full employment by next year is something to be seen, as a lot of structural changes need to be made.

The ISM Manufacturing PMI indicates the overall economic condition in the U.S. was a beat coming in at 60.0 higher than the consensus of 58.8. The Markit Services PMI figure reported 0f 59.8 was better than the forecast of 58.9, but the ISM Services PMI fell short of the expectations with a figure of 55.3 versus the consensus of 58.7.

Very positive news this week for the labor market. Continuing Jobless Claims came in at 4.295 M, lower than the consensus of 4.3 M, and Initial Jobless Claims came in at 745K lower than the consensus of 750K. The Nonfarm Payrolls figure of 379K was a big beat, compared to the consensus of 182 K. The Unemployment rate fell to 6.2%, better than the consensus of 6.3%.

The economic data was very positive and supportive for the week ending on March 5, 2021.

U.S. Stock Market Weekly Performance

The major US stock market indexes closed as follows on March 5, 2021:

• Dow Jones Industrial Average: Close 31496.30, +1.82% for the week, +2.91% Year-to-date

• S&P 500 Index: Close 3841.94, +0.81% for the week, +2.29% Year-to-date

•  Nasdaq Composite Close 12920.15, -2.06% for the week, +0.25%, Year-to-date

• Russell 2000: Close 2192.21, -0.40% for the week, +11.01% Year-to-date

Economic events for the week March 8- March 12, 2021:

Important economic data for the next week will be the weekly Initial and Continuing Jobless Claims, the Consumer Price Index, the Michigan Consumer Sentiment Index

Sources:

https://www.wsj.com/market-data/stocks/us/indexes

https://www.fxstreet.com/economic-calendar