Dow, S&P 500 Finish at New Highs After Jobs Report

The jobs report suggested that the economic recovery continued at a strong pace in July, but no so much to raise new fears of an overheating economy. Hitting that sweet spot matters for its implications for Federal Reserve policy. Investors have been focused lately on the central bank’s decision making on when and how to reduce Covid-19 pandemic-era monthly asset purchases.

The Federal Open Market Committee next meets in the last week of September.

“In all, this is a vigorous report and will push the ball forward for the Fed closer to a tapering decision,” wrote Stephen Stanley, chief economist at Amherst Pierpont Securities, on Friday. “If we get another report like this for August, I would expect the FOMC to announce an initial taper at its next meeting in late September.”

That tapering could then begin in late 2021 or early next year.

Also read: What the July Jobs Report Could Mean for Fed Policy

Government bond yields rose on Friday after the jobs numbers, but not so much as to suggest a major change in policy expectations. The yield on the 10-year U.S. Treasury note ticked up 7.1 basis points—or hundredths of a percentage point—to 1.288{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}. Treasury yields remain ultralow, but that’s a relatively large move for the bond market.

The higher yields hit growth stocks on Friday. Valuations of companies with the bulk of their earnings expected to arrive in the future are hurt by higher discount rates. Those make near-term earnings relatively more valuable.

Accordingly, growth-heavy consumer discretionary and technology sectors were among the worst-off groups in the S&P 500 on Friday. Financials and materials stocks, meanwhile, led the index higher 2.1{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} and 1.4{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}, respectively.

More broadly, as for how the Fed’s position on tightening monetary policy could influence stocks, analysts remain bullish on equities even as the exact outcome remains unclear.

“We don’t see an immediate cause for concern in the Fed’s efforts to prime the market for an eventual tightening,” said Mark Haefele, the chief investment officer at UBS Global Wealth Management. “We believe that the equity rally can continue and expect greater gains in cyclical and value sectors, including energy and financials.”

In Asia, Hong Kong’s

Hang Seng

declined 0.1{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} Friday while the

Shanghai Composite

dipped 0.2{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} and Tokyo’s

Nikkei 225

climbed 0.3{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}.

The

FTSE 100

in London and the pan-European

Stoxx 600

both finished essentially flat. The

CAC 40

in Paris closed 0.5{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} in the green and Frankfurt’s

DAX

lifted 0.1{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}.

It was the last day of a packed week for corporate earnings, with

Maersk

(ticker: AMKBY),

Canopy Growth

(CGC), and

DraftKings

(DKNG) among the companies reporting results.

Carvana

 (CVNA) stock gained 2.6{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} after the online used-car retailer reported a surprise profit of 26 cents a share, beating forecasts for a 41 cent loss, on sales of $3.34 billion, topping expectations for revenue of $2.44 billion.

Plug Power

(PLUG) gave up an earlier rise to slip 0.4{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} despite reporting an 18 cent loss, worse than the 8 cent loss predicted by analysts, on sales of $124.56 million—beating expectations for $114.02 million.

DraftKings increased 2.2{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} after reporting a loss of 76 cents a share, below forecasts for a loss of 52 cents. Revenue of $298 million, however, topped expectations for sales of $242.41 million, and the company also raised its 2021 revenue guidance.

Novavax

(NVAX) fell 19.6{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} on concerns that its Covid-19 vaccine is taking too long. Shares had climbed strongly since the start of the pandemic on hype about the company’s vaccine candidate.

Expedia

(EXPE) dropped 7.9{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} after reporting a loss of $1.13 a share, missing forecasts for a 65 cent loss. Sales of $2.11 billion beat expectations for revenue of $2 billion.

FireEye

(FEYE) tumbled 17{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} after reporting a surprise 14 cent per-share loss—analysts had been expecting a 9 cent per-share profit—on revenue of $114 million, below forecasts for $245 million.

Write to Jack Denton at jack.denton@dowjones.com.