Dow, S&P 500, Nasdaq end at record highs, extending streak of weekly gains on Pfizer pill study, stronger-than-expected jobs report

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MARKET SNAPSHOT

All three major U.S. stock indexes ended at all-time highs Friday, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite each notching a fifth straight week of gains after a stronger-than-expected October jobs report.

Pfizer Inc. shares surged as the vaccine maker released a study of its COVID-19 antiviral drug suggesting it is successful in combating the illness. The news was seen adding to positive investor sentiment for equities and the economic recovery.

How did stock indexes trade?

  • The Dow Jones Industrial Average rose 203.72 points, or 0.6%, to close at a new peak of 36,327.95.
  • The S&P 500 gained 17.47 points, or 0.4%, to finish at a record 4,697.53.
  • The Nasdaq Composite added 31.28 points, or 0.2%, to an all-time high of 15,971.59.

On Thursday, the Dow Jones Industrial Average snapped a five-day winning streak, while the S&P 500 and Nasdaq Composite each logged a sixth straight record close.

For the week, the Dow rose 1.4%, the S&P 500 gained 2% and the Nasdaq advanced 3%. The Dow had its longest winning streak since the week ending February 22, 2019, according to Dow Jones Market Data.

What drove the market?

U.S. stocks climbed to fresh records on a good jobs report and investor optimism surrounding the study of Pfizer’s antiviral drug treating COVID-19. 

“You see a huge rotation into the reopening trade,” said Zhiwei Ren, managing director and portfolio manager at Penn Mutual Asset Management, in a phone interview Friday. Shares of airlines, hotels and restaurants have jumped on the Pfizer news as it appears people may be able to “to take a pill when they get sick” from COVID to prevent severe illness.

Shares of online travel company Expedia Group Inc. soared Friday, closing 15.6% higher, according to FactSet data. Concert promoter Live Nation Entertainment Inc. jumped 15.1% while Royal Caribbean Group sailed about 9% higher.

The U.S. economy created 531,000 jobs in October, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had forecast a rise of 450,000. The unemployment rate fell to 4.6% last month from 4.8%. Also, September job gains were raised to 312,000 from a previous estimate of 194,000, while August jobs were raised to 483,000 from 366,000.

“The Fed appears comfortable with the economy right now and today’s jobs report validated that optimism,” said David Donabedian, chief investment officer of CIBC Private Wealth U.S.

“Third quarter earnings, the [Fed] plans to taper quantitative easing without rushing to raise rates, and the falling unemployment rate in October have created tailwinds for the equity market. It is not surprising to see another strong week for stocks,” he said.

However wages were up nearly 5% year over year, which can be a harbinger of stickier inflation. “If we continue to see strength in wage numbers going forward, it may catalyze the Fed to get more aggressive on taper and could pull forward rate hike expectations next year,” said Cliff Hodge, chief investment officer for Cornerstone Wealth.

Investors also snapped up Treasurys in the wake of the data, sending yields, which move the opposite direction of prices, down sharply. The benchmark 10-year Treasury yield dropped about 7 basis points to 1.451%, hitting its lowest level since late September.

Investors have been sifting through a heavy slate of corporate earnings reports as the busiest portion of what’s been an upbeat third-quarter earnings season comes to an end.

“Earnings have been a boost to sentiment, for sure,” said Aoifinn Devitt, chief investment officer of Moneta, in a phone interview Friday. “I think there will be a strong holiday season.”

The equity rally was aided by “growing optimism the U.S. is close to winning the war against COVID after Pfizer’s promising data with their oral antiviral treatment,” said Edward Moya, senior market analyst at Oanda, in a note.

PfizerPFE shares jumped 10.9% after the pharmaceutical company said its COVID antiviral reduced the risk of hospitalizations or death by 89% in a Phase 2/3 study.

What companies were in focus?

  • Shares of Merck & Co. Inc. closed 9.9% lower as investors appeared to shun Pfizer rivals. Merck said last month that its experimental treatment reduced the risk of hospitalization or death by 50% in a late-stage trial. The company has already submitted an application to U.S. regulators for authorization.
  • Shares of Peloton Interactive Inc. tumbled more than 35% after the exercise equipment maker produced a weaker-than-expected holiday outlook and cut its full-year forecast.
  • Shares of Uber Technologies Inc. UBER rose 4.2%, after the ride-hailing company late Thursday said that third-quarter revenue grew in both of its major businesses across all regions as COVID-19 restrictions eased, though losses also more than doubled.
  • Lions Gate Entertainment Corp. shares soared 22.1% after the media group said it’s mulling a sale or spinoff of its Starz unit.
  • Airbnb Inc. shares jumped 13% after the travel-booking company posted its highest-ever quarterly revenue and net income.
  • Pinterest Inc. stock gained 5.9% after reporting strong sales and earnings, but fewer-than-expected monthly users.
  • Square Inc. SQ late Thursday reported lower-than-expected revenue for the third quarter as less volatile pricing for bitcoin affected demand, though the company’s chief financial officer noted “strength” in volume during October. Shares fell 4.1%.
  • Shares of Shake Shack Inc. SHAK jumped 16.5% after reporting a smaller-than-expected loss.
  • GoPro Inc. GPRO late Thursday delivered results that beat expectations for its most recent quarter and expressed confidence in its ability to hit its full-year targets, despite a continuing supply crunch that may limit upside. Shares climbed 7.9%.
  • Online auto retailer Carvana Co. CVNA shares declined 0.9% after it said a continued wave of demand for used cars nearly doubled its quarterly revenue, though efforts to build inventories saw it run against “significant operational constraints.”

How did other assets trade?

  • The ICE U.S. Dollar Index   a measure of the currency against a basket of six major rivals, was down 0.1%.
  • Oil futures rose, with the U.S. benchmark CL00 CLZ22 climbing 3.1% to settle at $81.27 a barrel. Gold futures GC00 rose 1.3% to settle at $1,816.80 an ounce.
  • The Stoxx Europe 600 added less than 0.1% to close at a record high and advanced 1.7% for the week. London’s FTSE 100 gained 0.3% Friday for a weekly gain of 0.9%.
  • The Shanghai Composite lost 1% Friday, falling 1.6% for the week. The Hang Seng Index closed 1.4% lower for a weekly loss of 2%. Japan’s Nikkei 225 declined 0.6% Friday, but remained up 2.5% this week.

–Barbara Kollmeyer contributed to this report.

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