Before The Bell - Stock futures are flat to mixed, and not pushing strongly in either direction following a disappointing government employment report for August, and ahead of the long Labor Day weekend. The reported 235,000 jobs gained fell well short of analysts’ expectations for 725,000 additions, and pointed to deceleration in growth.
Investors have largely been bullish about prospects for earnings as the economy reopens, bidding up stocks in the process. The monthly jobs report is viewed as a key marker in terms of how the Federal Reserve views the strength of the recovery, and a heavily weighted determinant of policy.
The Fed has signaled that it is waiting to see further signs of progress in business conditions before it begins to pull back its hefty monetary support. The latest monthly employment report suggests a delay in any policy changes.
Moreover, any interest rates hikes do not appear to be on the horizon, given the uncertainty injected by the Delta variant of the coronavirus and ongoing supply chain issues.
One company after the other has pointed to ``supply chain issues’’ as a reason for underperformance, usually in terms of sales. In particular, the automobile industry has noted a shortage of computer chips is slowing production lines. General Motors (GM) will temporarily idle many of its North American assembly plants this month as a result.
Several retailers now reporting earnings have also blamed supply chain problems on recent woes. They have listed factory slowdowns, a lack of container ship availability, and worker shortages to load and deliver shipments, as part of the broad supply chain problem. The weeklong shutdown of the Suez Canal earlier this year when a giant ship became lodged made the backup worse. It is not clear how quickly these difficulties will clear up.
In view of the question marks, the Federal Reserve aims to move slowly in restoring interest rates to more substantial levels so as not do derail the economy’s momentum, which may be easing on its own.
Meantime, Thursday’s market saw the NASDAQ and the S&P 500 finish at record highs. At the close, the Dow Jones Industrial Average climbed 131 points; the NASDAQ added 22 points; and the S&P 500 gained 13 points.
Energy sector shares did especially well, helped by oil prices that rose to nearly $70 a barrel in New York trading.
Note: We wish all of our readers and their families well this holiday weekend. - Robert Mitkowski