Strong jobs report sets S&P 500 and Dow Jones to record highs

The Dow Jones Industrial Average and S&P 500 rose to record highs on Friday after a stronger-than-expected jobs report alleviated the concerns of investors.

Despite that, consumer discretionary shares and technology stocks were hurt by a rise in long-dated benchmark bond yields and the U.S. dollar, putting pressure on growth stock areas of the market.

The Dow Jones Industrial Average jumped 144.26 points, or 0.4%, and closed at an all-time high of 35,208.51. The S&P 500 was up nearly 0.2% to clinch its record close at 4,436.52, while the tech-heavy Nasdaq Composite fell 0.4% to settle at 14,835.76.

For the week, the Dow was heading for a 0.8% gain, while the S&P 500 was on pace to advance 0.9% and Nasdaq was on track to rise 1.1%.

The U.S. economy added 943,000 jobs in July, according to the Labor Department, beating economists' estimate of 845,000 jobs. The unemployment rate dropped to 5.4%, below the estimate of 5.7%. Friday’s jobs report showed that the stunted employment recovery has once again picked pace as the gain in new jobs exceeded that in June.

The fast spread of the delta variant of COVID-19 has affected the back-to-work plans of various businesses. The July jobs data points towards an increase in recruitment and a quicker return to normalcy.

Bank shares led the gains on Friday with JPMorgan and Bank of America rising nearly 3%, while Wells Fargo jumped about 3.8%. Shares of Goldman Sachs hit an all-time high of $397.89, jumping 3.54%. Regional bank stocks had their best day in nearly a month.

The 10-year Treasury yield jumped as high as 1.3% on Friday.

In contrast, the consumer discretionary sector of the S&P 500 was down 0.7% led by declines in Amazon.com, Tesla, and travel-related firms Booking Holdings and Expedia Group.

The latest jobs data also may encourage the Federal Reserve to pull back on accommodative measures that have stimulated economic growth and asset prices.

Fed Vice Chairman Richard Clarida, said the conditions for the first-rate increase will be met “by year-end 2022” allowing for the first move in 2023. The Fed vice chairman termed the recent rise in inflation as “transitory,” but added that the risks of higher inflation are greater than the risks of low inflation.

So far, 89% of companies in the S&P 500 have reported earnings this quarter, and 87% of those have beaten earnings expectations, according to CNBC analysts who termed it to be the best quarter for earnings surprises since at least 2008.

(With inputs from CNBC)

Picture Credits: Reuters