Stocks reversed early gains on Friday, suggesting Wall Street would extend its losing streak to a fifth day, with investors growing more cautious about the COVID-19 pandemic’s impact on the economy.
President Joe Biden spoke with Chinese President Xi Jinping for the first time in months, which also provided modest comfort to investors. While little progress was made, the call highlighted how the world’s two largest economies — which have a raft of differences on critical policy issues between them to work out — are still keeping the lines of communication open.
“The risk-on mood, perhaps spurred by the first talks between Biden and Xi in seven months, is helping lift equity markets and is weighing on the dollar against most of the major currencies,” noted Marc Chandler, chief market strategist at Bannockburn Global Forex, in a morning note he entitled “frenemies talk, but progress elusive.”
Meanwhile, data on Friday showed that prices paid by producers surged last month, as supply and labor strains exerted more inflationary pressure on the economy — showing how demand remains white hot and resilient, even in the face of COVID-19. The producer price index jumped by 0.7% last month, and skyrocketed by 8.3% through August, the biggest year-on-year advance since November 2010, after surging 7.8% in July.
“At first blush it could raise some eyebrows that the market would shrug off the biggest producer price increase ever recorded, yet context is key,” said Mike Loewengart, managing director of investment strategy at E*TRADE Financial.
“Anyone who has bought pretty much anything recently knows that supply chain issues are widespread and inflation is real, so this likely won’t be too much of a surprise for the market,” he added. “Keep in mind we’re still in the transitory period where the Fed is not inclined to budge on easy money policies.”
During Thursday’s regular session, major benchmarks logged a 4th consecutive day of losses. Traders have been struggling to reconcile a seemingly hot jobs market with soaring coronavirus infections that have blunted the recovery’s momentum. However, the slowing momentum also gives the Federal Reserve room to keep its foot on the monetary policy pedal, which has given stocks a boost.
Yet playing in the background is the COVID-19 pandemic, where deaths and hospitalizations are soaring because of the more contagious Delta variant. President Joe Biden announced on Thursday a sweeping set of mandates designed to nudge hesitant citizens into getting vaccinated.
The Dow Jones Industrial Average and S&P 500 Index have now retreated four days, but the technology-laced Nasdaq has fared slightly better, having dropped 2 days in a row. Investors have been in a foul mood since August’s jobs data fell far short of market expectations last week, tempering hopes for the fourth quarter and getting September off to a rough start.
“You look at the markets and they’ve been amazingly calm and we think September is right for a pullback,” G Squared Wealth CFA CIO Victoria Greene told Yahoo Finance Live on Thursday. “We’re kind of in a purgatory.”
However, at least 2 pieces of jobs data this week have painted a different picture than August’s nonfarm payrolls. Labor Department data showed that open jobs hit yet another series record, with workers quitting their jobs en masse, and nearly 11 million positions unfilled. And on Thursday, new jobless claims set a new pandemic era low at 310,000, temporarily allaying fears about the economy.
On Thursday, Biden ordered that all businesses with over 100 employees require workers to get inoculated or be tested weekly, and declared his intent to require all federal employees to get their shot. And a growing number of private employers are already imposing vaccine mandates, even as many push back return-to-office plans as the Delta variant rears its head.
“We’ve been patient, but our patience is wearing thin,” a clearly frustrated Biden declared, addressing the number of vaccine-resistant holdouts — many of whom have flooded hospitals around the country. “And your refusal has cost all of us.”
Wall Street economists have explicitly linked mass vaccinations to growth, and the president’s move could also bolster expectations for the economy, and market sentiment.
9:30 a.m. ET: Stocks pop at the open
Here were the main moves in markets as of 9:32 a.m. ET:
S&P 500 (^GSPC): 4,519.65, +26.37 (+0.59%)
Dow (^DJI): 35,096.00, +216.62 (+0.62%)
Nasdaq (^IXIC): 15,345.02, +96.76 (+0.63%)
Crude (CL=F): $69.81 per barrel, +$1.67 (+2.45%)
Gold (GC=F): $1,796.40 per ounce, -$3.60(-0.20%)
10-year Treasury (^TNX): +2.5 bps to yield 1.323%
8:30 a.m. ET: PPI skyrockets in August
U.S. producer prices soared in August, indicating that high inflation is likely to persist for a while, with supply chains remaining tight as the COVID-19 pandemic drags on.
The producer price index for final demand rose 0.7% last month, the Labor Department said on Friday. That followed two straight monthly increases of 1.0%. In the 12 months through August, the PPI accelerated 8.3%, the biggest year-on-year advance since November 2010, after surging 7.8% in July.
7:50 a.m. ET Friday: Futures rise, look to end week on a high note
Here’s where markets were trading before the bell:
S&P 500 futures (ES=F): 4,511.50, +19.25 (+0.43%)
Dow futures (YM=F): 35,046.00, +176.00 (+0.50%)
Nasdaq futures (NQ=F): 15,625.25, +66.50(+0.43%)
6:25 p.m. ET Thursday evening: Stock futures mixed
Here’s where markets were trading in the after-hours session:
S&P 500 futures (ES=F): 4882.75, -0.25
Dow futures (YM=F): 34,877, +7.00
Nasdaq futures (NQ=F): 15,566, +6.00