Nasdaq, S&P 500 On Track For Records, While Dow Trails

By Anna Hirtenstein and Karen Langley

Stocks pared early gains Friday after the monthly employment report showed the U.S. lost jobs in December as investors continued to look ahead to the prospect of additional fiscal stimulus.

The S&P 500 stock index added 0.4% while tech-heavy Nasdaq Composite advanced 0.8%. The Dow Jones Industrial Average ticked down 0.1%, or about 20 points, dragged down in part by a decline in shares of industrial conglomerate 3M.

All three indexes closed Thursday at records as investors focused on the potential for more government spending after victories in runoff races in Georgia that will give Democrats control of the U.S. Senate.

Meanwhile, the surging coronavirus pandemic continues to weigh on the economy. The Labor Department report Friday showed the U.S. shed 140,000 jobs in December, ending seven months of job growth.

"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."

Stocks have rallied this week despite the political unrest in Washington. Fresh stimulus measures under President-elect Joe Biden and a Democratic-controlled Congress are expected to provide crucial support to American households and businesses as the coronavirus pandemic restricts work and social activity in the winter months.

"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.

In a video Thursday night, President Trump acknowledged that he lost the presidential election. He has pledged there will be an orderly transition of power.

Job growth has slowed in recent months as cold weather, rising Covid infections, and new restrictions on businesses deal a setback to the recovery from the pandemic. The U.S. set a new single-day record for reported deaths associated with Covid-19, with more than 4,000 deaths reported Thursday.

"The virus is still raging in the U.S. and they have had more controls and social distancing -- people being worried, companies not wanting to invest right now -- so it's not completely surprising if the numbers are disappointing," said Shaniel Ramjee, a multiasset fund manager at Pictet Asset Management. If this happens, "it will underline the pressure for Congress to put additional stimulus, and might bring forward stimulus expectations."

Among individual stocks, 3M shares dropped 2.3% after a downgrade by Bank of America that cited risks related to environmental regulation as Democrats take control of the Senate. Micron Technology shares added 0.5% after the memory-chip maker reported better-than-expected earnings.

Tesla shares climbed 7.7%, 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 1.112%, from 1.070% on Thursday.

Overseas, the pan-continental Stoxx Europe 600 rose 0.6%. Among European equities, Credit Suisse fell 3.7% 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 1236ET