US Stocks Settle at Fresh Highs

What’s happening: US stocks recorded gains on Friday, with all the three major indices settling at new highs.

What happened: Strong jobs data for October and encouraging covid-19 pill updates from Pfizer provided a boost to the overall market sentiment.

While most sectors of the S&P 500 moved higher on Friday, one key sector traded in the red zone.

Why it matters: The Labor Department announced a higher-than-projected rise in US employment in October amid a decline in covid-19 cases over the summer. The US economy added 531,000 jobs last month, versus projections of 450,000 job additions. The country’s unemployment rate eased to 4.6% in October, from 4.8% in the prior month. However, worker shortage resulted in wage growth, taking the annual hourly earnings higher by 4.9%.

Shares of Pfizer Inc surged around 8% on Friday after the drugmaker said its covid-19 experimental antiviral pill reduced the risk of severe disease by 89% in its Phase 2/3 study. The upbeat announcement from Pfizer helped travel stocks record sharp gains on Friday, taking the S&P 1500 Airlines index higher by more than 6%.

However, a steep decline of around 10% in Merck’s stock weighed on the S&P healthcare sector, pushing it into the red zone.

A strong earnings season and upbeat outlook from several companies also supported market sentiment. Expedia’s shares climbed more than 15% after the online travel company reported stronger-than-expected quarterly revenues.

The Dow Jones index jumped 203.72 points to end at a new high of 36,327.95, while the S&P 500 rose 0.4% to close at a record 4,697.53 on Friday. The Nasdaq 100 rose 0.08% to 16,359.38.

For the week, the 30-stock index gained 1.4%, while the S&P 500 and Nasdaq 100 climbed 2% and 3%, respectively. With this, all three indices recorded gains for the fifth straight week.

What to watch: Investors await inflation expectations data from the US, scheduled for release later today. The consumer and producer price inflation reports, due later this week, will also remain in focus.

The British pound will be in focus today after extending losses on Friday.

Context: The British pound held close to one-year lows on Friday after the Bank of England announced its interest rate decision.

Details: The reopening of the economy amid the fast rollout of covid-19 vaccinations had been supporting the sterling. However, Britain’s energy crisis and worries around labour shortages after the Brexit weighed on the currency.

The Bank of England left interest rates unchanged on Thursday, which came as a surprise as markets were widely expecting a hike.

A majority of Bank of England’s Monetary Policy Committee members voted to hold interest rate at the all-time low of 0.1% during their November meeting, which resulted in the sterling’s steepest daily decline in over 18 months on Thursday.

Central bank Governor Andrew Bailey had last month stressed the need to prevent inflation from accelerating, which had led to markets expecting a rate hike. Expectations are for inflation to accelerate rapidly over the next twelve months.

The GBP/USD pair fell 0.24% to close at 1.3498 on Friday, representing the forex pair’s weakest level since October 1. The British currency was only slightly higher than the December 2020 lows. The GBP/EUR forex pair also tumbled to its lowest level since October 1.

What to watch: With the lack of major economic reports due for release today, investors await data on GDP growth, industrial production and balance of trade scheduled later in the week.

The covid-19 pandemic remains one of the major concerns for markets, with total global cases reaching 250.6 million.

Other Markets: European trading indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 50 and STOXX Europe 600 up by 0.33%, 0.15%, 0.76% and 0.05%, respectively.

South Africa’s foreign exchange reserves, SACCI business confidence index, Brazil’s car production, new vehicle registrations and Central Bank of Brazil’s focus market readout, Mexico’s gross fixed investment and car production, as well as Eurogroup meeting.