Stocks Take Off, But Twitter Gets the Shaft
The S&P 500 staged an impressive comeback on Friday.
At 8:30 a.m. EST, the October non-farm payrolls report came in stronger than expected, with 204,000 jobs created vs. expectations of 120,000K. Additionally, September’s number was revised up to 163,000 from 148,000. Household survey employment showed a decline of 735,000 jobs as the government removed furloughed workers during the shutdown, though they may be added back to the labor force count next month.
Interestingly enough, ahead of the news, there were rumors circulating that the non-farm payroll number would be announced at 180,000, driving significant volatility in currencies, commodities, stocks, and bonds.
In reaction to the report, we saw drops in US stock futures and commodities, while the dollar and US Treasury yields popped. Strong economic numbers, particularly when it comes to employment, often drive fears that the Fed will move closer to tapering its quantitative easing activities.
However, stocks quickly reversed themselves and powered higher, with the S&P 500 (INDEXSP:.INX) finishing 23 points higher at 1770.61.
It was very much a “risk-on” day, with significant outperformance in the Nasdaq (INDEXNASDAQ:.IXIC) as high-beta tech names like Facebook (NASDAQ:FB), LinkedIn (NYSE:LNKD), and Netflix (NASDAQ:NFLX) rebounded from Thursday’s heavy downside pressure.
Plus, financial stocks and small-cap stocks showed real strength, while the interest rate-sensitive utility sector took a hit on the aforementioned spike in US Treasury yields.
Keep in mind, however, that Thursday was a very big down day, an ideal setup for a rally off strong economic data that few folks were expecting. In fact, the high estimate on the NFP number was 175,000, so 200,000 was an unqualified upside surprise.
Elsewhere, in its second day of trading, social media giant Twitter (NYSE:TWTR) fell 7.2% to $41.65.
Hudson Square Research analyst Daniel Ernst initiated coverage with a sell rating, saying, "There seems to us no upside scenario not already more than included in Twitter's implied growth outlook." However, after Thursday’s 72% pop off its $26 IPO price, profit-taking was already likely for today.
Electric-car maker Tesla (NASDAQ:TSLA) came under serious pressure in early trading today after the National Highway Traffic Safety Administration announced it was looking into a fire in a Tesla Model S sedan, the third in six weeks. However, it staged a comeback in the afternoon and finished almost $6 above its low. Still, the stock is nearly 30% off its late-September all-time high of $194.50.
There were also a number of earnings reports today. Notable names beating expectations include Brookfield Asset Management (NYSE:BAM) and Cablevision (NYSE:CVC), while Sonic Automotive (NYSE:SAH) and EW Scripps (NYSE:SSP) missed consensus estimates.
Monday's Financial Outlook
There are no economic reports scheduled for Monday, which is Veterans Day. Note that the US Treasury Market will be closed.
Earnings season is winding down, though we will see numbers from Cooper Tire (NYSE:CTB) and Arkansas Best (NASDAQ:ABFS) before the open, and Hologic (NASDAQ:HOLX) and Rackspace (NYSE:RAX) after the close.
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