Major indices held pretty steadily after the report—arguably quite a feat given the recent string of record highs. Perhaps it’s one of those times when bad news doesn’t have much of an impact on stock prices, as a report like this could ease fears of any near-term Fed move to pull back on stimulus. Remember, just a week ago Fed Chairman Jerome Powell suggested the Fed could begin tapering its bond-buying program but added that employment hadn’t met the central bank’s goals. This report doesn’t really go very far to meet the Fed’s goal of getting employment back to where it was before Covid.

Also, a lot of this miss appeared to be centered in the Leisure and Hospitality space, where employment was unchanged after averaging gains of 350,000 per month over the previous six months. That’s probably the biggest reason for the huge miss in expectations by Wall Street, and likely reflects Delta variant concerns affecting restaurants and hotels. Assuming the country gets a handle on this variant in the coming months, it’s possible jobs growth in this category could rebound pretty quickly, as it often has following disturbances.

It was good to see 37,000 jobs added in manufacturing and 53,000 jobs added in transportation and warehousing during August. Those are categories you like to see going up because they can speak to decent underlying growth in economic demand by businesses and consumers. Also, average hourly earnings rose 0.6%, which was above the 0.3% estimate and might have partly reflected a lack of growth in the low-paying Leisure and Hospitality sector. This isn’t a number that’s likely to have the Fed worried about wage inflation, but it does mean more money going into peoples’ pockets—never a bad thing. 

Also, you can’t overlook that the overall unemployment rate fell to 5.2% from 5.4% the previous month. That’s the lowest since Covid began. Sometimes, drops in the unemployment rate can reflect discouraged workers leaving the labor force and no longer being counted as unemployed, but that wasn’t the case in August. Among those not in the labor force who wanted a job, or, as the Labor Department defines it, “the number of persons marginally attached to the labor force,” decreased by 295,000 over the month.

Typically, a long holiday weekend can mean thin trading leading into Friday afternoon as some market participants look to get an early start on any festivities. Volume might be lower than normal later today, so anyone stepping in to trade might want to consider keeping trade sizes lower than normal in case of sudden swings. This is the time of year when people tend to get disengaged. While not everyone is gone, many families are getting the kids back to school or wrapping up late-summer vacations. 

Earnings-wise, next week doesn’t look too crowded, either. There’s Oracle (NYSE:ORCL) and Kroger (NYSE:KR), but otherwise, not a lot of big gorillas can really move a market. Instead, investors may be watching for news out of Washington, D.C., on any moves in the budget or infrastructure bills. The debt ceiling is another issue that’s been put off, but Congress and the administration can’t kick that ball down the road forever. 

Yesterday saw strength across the board in all the major indices as investors seemed to get some cheer out of a positive report from the government on initial jobless claims. Eight of the 11 S&P 500 sectors finished in the green, led by Energy as crude prices rolled up gains. Crude is now back toward the upper end of its recent range, hitting $70 a barrel yesterday. There’s been firm resistance up near $75 that’s lasted literally for years, however. Several tests of that earlier this year came to nothing. 

The simple takeaway from higher crude prices is that people might be getting more optimistic about economic growth. Sentiment around that has been back and forth all week, with so-called “reopening” stocks down one day and up the next. Yesterday was an “up” day, with shares of small-caps gaining ground and Energy stocks also showing some muscle. Those same Energy stocks we saw leading the charge on other “reopening days” lately like Occidental (NYSE:OXY) and Halliburton (NYSE:HA) showed up on the leaderboard again Thursday.

Interestingly, the Technology sector was one of the only ones to lose ground yesterday as shares of Microsoft (NASDAQ:MSFT), ORCL, and Broadcom (NASDAQ:AVGO) all fell. A few more days like this and you’ll probably hear pundits saying that it looks like earlier this year when the so-called “cyclicals” such as Financials and Energy outpaced Tech for months amid hopes for economic recovery. 

Yesterday we mentioned how “stay at home” stocks like Peloton (NASDAQ:PTON), Zoom (NASDAQ:ZM), and Chewy (NYSE:CHWY) all got pounded after recent earnings. Both PTON and ZM found some buyers on the dip Thursday, so it will be interesting to see if the same happens for CHWY in the coming days. 

CHART OF THE DAY: CHARGING UP. After a dim summer, the Energy sector (IXE—candlestick) has brightened a bit over the past week or two amid hope for stronger economic growth that’s raised crude prices. However, the Tech sector (IXT—purple line) which sometimes has traded the opposite of Energy this year, continues to fly high as well over the three months monitored by the chart. Data Source: S&P Dow Jones indices.  Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

U.S. Crude Looking Up: Looking back at the OPEC decision this week, another interesting thing was how the organization cited rising U.S. production as a reason not to produce more crude oil. There may be something to that. The U.S. oil rig count rose another five rigs last week to 410, according to Baker Hughes (NYSE:BKR), up from 180 a year ago. That’s pretty quick growth and could mean more U.S. crude starting to hit the market. We’ll get an update on the rig count today.

Gold hasn’t been able to successfully break above the four-week resistance at $1837.50, but the yellow metal refuses to sink below the 2021 lows of $1675.00, having bounced back from that level three times, the last test on August 9 showing aggressive refusal and resilience. Fed Chairman Jerome Powell recently said that tapering of the central bank’s $120 billion purchases will likely take place this year. But he didn’t specify when or how much. Is the gold market getting a sense that this “hawkish” message might be actualized in a more “dovish” and non-aggressive manner? To get a better read on the market’s sentiment, watch what the price of gold does as it approaches $1837.50. 

Covid Counters: The seven-day average of new Covid cases in the US has surged 88% from July 1 to Sept. 1. Starting with 19,722 cases on a weekly average, that figure bumped up to 166,080 according to The New York Times. Of course, we wouldn’t know any of this if it weren’t for Covid testing. Perhaps it wouldn’t be much of a surprise to see that around this same period, shares of US lab Quest Diagnostics (NYSE:DGX) also rose around 18%, while shares of Labcorp (NYSE:LH) rose 17%, although, between the two, the latter is the year’s clear leader in market performance by a wide margin. 

According to the Centers for Disease Control and Prevention (CDC), the Delta variant accounts for around 93% of all Covid cases across the globe. And according to the COVID-19 Scenario Modeling Hub, we’re looking at a potential October peak, though a doctor at John Hopkins Center for Health Security warns that cases are often underestimated and unclear. We don’t know what Delta has in store for us in the near future. But you can be more or less certain that until we get a lid on this new variant or any other variant that may emerge, for that matter, more Covid testing is likely to continue.