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Dow falls after big jobs report miss, tech stock gains limit losses

The Dow Jones Industrial Average retreated on Friday and the S&P 500 slipped from a record high after the August jobs report came in short of expectations, showing the impact of the delta-fueled Covid resurgence.

The Dow lost 74.73 points, or 0.21%, to 35,369.09, while the S&P 500 edged lower by 0.03% to 4,535.43 after holding a slight gain in afternoon trading. The broader market index was supported by tech stocks, which helped to lift the Nasdaq Composite by 0.21% to 15,363.52.

The Nasdaq was the best performing index for the week, rising 1.5%. The S&P 500 gained roughly 0.6%, while the Dow shed about 87 points, or 0.2%.

Nonfarm payrolls increased by 235,000 in August, the Labor Department said Friday. Economists surveyed by Down Jones were expecting 720,000 jobs. The report marks a significant slowdown from July’s revised number of 1.053 million and comes as the delta variant of Covid-19 has led to health restrictions being put back in place in some states and cities.

Federal Reserve Chairman Jerome Powell has emphasized the need for more strong jobs data before the central bank would start to unwind its massive bond-buying program, and the disappointing report could change expectations about when the Fed will start its tapering process.

The report raises questions about the long-term growth trajectory for the U.S. economy, but the impact of the Fed appeared to be offsetting that in Friday’s trading, said Yung-Yu Ma, the chief investment strategist at BMO Wealth Management.

The central bank will also be looking at how much Covid impacted hiring and activity during August. The virus variant has been a wild card for the economy, and its impact could be a factor that sways the Fed as it considers the first step away from the easing policies. Leisure and hospitality, which is the sector hit hardest by the pandemic in 2020, added zero jobs in August, according to the report.

Goldman Sachs chief economist Jan Hatzius said on “Squawk on the Street” that the impact of the delta variant could weaken in the months ahead, with cases and hospitalizations now declining in some states, and that the overall report was more of a “mixed picture” than the headline miss suggested.

“I think there is reason to believe the situation is improving somewhat and we’ll get better [jobs] numbers in coming months,” Hatzius said.

European stocks close lower as U.S. jobs data disappoints

European markets closed lower on Friday as investors reacted to key economic indicators out of the euro zone and the U.S.

The pan-European Stoxx 600 provisionally closed 2.58% down, with basic resources adding 2.32% while travel and leisure stocks slid 2.33%.

Back in Europe, euro zone business activity remained robust in August despite the impact of the Delta variant of Covid-19 and broad supply chain problems. The final IHS Markit composite PMI (purchasing managers’ index) reading for the bloc dropped to 59.0 from July’s 15-year high of 60.2, remaining well clear of the 50 mark that separates expansion from contraction.

Reference: CNBC