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Dow Climbs as Strong Jobs Report Keeps Cyclicals in Play; Tech Rebounds

·2 min read
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By Yasin Ebrahim

Investing.com – The Dow climbed Friday, as the stronger-than-expected jobs report stoked investor bets for cyclical sectors like energy, while dip buying in tech on weakness also supported sentiment.

The Dow Jones Industrial Average rose 0.90%, or 279 points, and the S&P 500 rose 0.96%, theNasdaq Composite rose 0.44%, and had been down more than 2% lower intraday.

The U.S. economy created 379,000 jobs last month, well above economists' consensus forecast of 182,000, with the unemployment rate falling to 6.2% from 6.3%, underpinned by easing Covid-19 restrictions and a ramp-up in vaccine distribution.

"While one report does not make a trend and payroll data are certainly volatile, it's safe to conclude that the winter soft patch is now officially over," Jefferies (NYSE:JEF) said in a note.

Cyclical stocks – those that move in tandem with the economy – were buoyed by signs of a faster recovery, with energy stocks leading to the upside amid rising oil prices.

Oil prices added to their gains from Thursday, when OPEC and its allies decided to keep output steady, prompting economists to up their forecasts on energy prices amid an ongoing tightening in global supplies.

Goldman Sachs (NYSE:GS) raised its forecast on Brent Oil Futures by $5 per barrel to $75/bbl in 2Q and $80/bbl in 3Q21.

"We believe it is now clear that OPEC+ is in fact pursuing a tight oil market strategy, with our updated supply-demand balance pointing to OECD falling to their lowest level since 2014 by the end of this year," Goldman Sachs said in a note.

Fears over a sharp upturn in inflation, initially pushed U.S. rates sharply higher, souring the outlook for the high-flying tech stocks, but investors swooped in buy the dip helping the sector move off intraday lows.

Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), while Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) moved off their lows of the day.

The rebound in tech also coincided with remarks from St. Louis Federal Reserve President James acknowledging the recent rise inflation and rates, though downplayed fears about a sustained pick-up in inflation.

Still, the faster pace of vaccine rollouts and ongoing reopening will boost inflation and likely take rates along for the ride, potentially keeping a lid on growth stocks.

"Well inflation in the reopening sensitive sectors is likely to prove transient, a more sustainable impulse to inflation will start to take shape in 2021, led by shelter inflation healthcare services, and a multi quarter past true of dollar weakness into goods," Morgan Stanley (NYSE:MS) said.

In other news, Imax (NYSE:IMAX) jumped 15% after its upgraded outlook on performance for 2021 offset mixed fourth quarter results.

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