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Stocks were mixed on Friday following the release of the Labor Department’s August jobs report, which showed a sharp deceleration in hiring last month amid the Delta variant’s latest spread.

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The S&P 500 traded near the flat line after reaching record intraday and closing highs just a day earlier. The Nasdaq edged higher to set a record close as investors piled back into technology and growth stocks seen as more defensive in a decelerating economic growth environment. The Dow, a proxy for cyclical and reopening stocks, fell slightly.

Investors were closely watching the government’s monthly jobs report. Non-farm payrolls increased by a disappointing 235,000, decelerating from the more than 1 million job gains posted during the previous month, though the unemployment rate ticked down to a fresh pandemic-era low of 5.2%. 

The report was consistent with the deceleration evident in other economic data as well, including in retail sales, consumer confidence, and manufacturing- and service-sector purchasing managers’ indices. 

Importantly for traders, the jobs report will be the final major labor market datapoint officials at the Federal Reserve receive before their next policy-setting meeting later this month. Members of the Federal Open Market Committee have signaled they are looking especially closely at labor market reports for signs of whether the economy has improved enough to warrant less accommodative monetary policies. 

Namely, Fed Chair Jerome Powell said in public remarks last week that, “If the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.” This would set off the process of removing one key element of the central bank’s crisis-era toolkit for supporting the economic recovery, and which has also served to underpin equity prices. 

“What we’re seeing is the market really trying to wrestle with the idea of what matters to it more: Is it about the economy, or is it about monetary policy?” Steve Sosnick, chief strategist of Interactive Brokers, told Yahoo Finance Live on Friday. “Now, we’ve been in a monetary-driven market for so long it’s hard to say that monetary factors aren’t at the forefront of the market’s mindset right now.”

“But what I think we may be seeing here … we can’t really figure out whether this delays tapering in a meaningful way,” he added “But there’s stuff in here that is not necessarily bad other than the headline number. Wages are good, the unemployment rate is good.”

Namely, equity traders were looking for an August jobs report that was still solid, but not too strong relative to consensus estimates. 

“The setup for equities especially is a unique one because markets have continued to rise and continued to show a lot of resilience in the face of some waning economic data,” Dave Mazza, managing director for Direxion, told Yahoo Finance. “All of that is not necessarily a great sign, but markets continue to do well because we’re in an environment where some of this bad news is actually good news from the market perspective.” 

Still, on the whole, strategists largely remain upbeat about the pace of the U.S. economic recovery and the backdrop for domestic stocks. While lingering questions remain over the virus and future monetary and fiscal policies, the market has so far looked through these concerns to reach all-time highs.

“We’re continuing to see ups and downs with Delta, but aside from those changes in sentiment at the margin, the bigger picture is that we still have a self-reinforcing recovery,” Rebecca Patterson, Bridgewater director of investment research, told Yahoo Finance. “We’re seeing companies flush with cash, we’re seeing a huge amount of demand that was obviously pushed higher thanks to all the fiscal and monetary stimulus over the last year, companies trying to meet that demand, hiring, being forced to lift wages. As the consumer gets higher wages and jobs, they have more ability to spend.” 

“At the end of the day, it’s the very easy monetary policy, the fiscal still flowing through, and this positive flywheel of businesses and consumers reinforcing each other that’s helping to lift the market,” she added.

4:00 p.m. ET: Stocks end mixed, Nasdaq posts record closing high

Here’s where the major indexes ended the regular trading day on Friday.

  • S&P 500 (^GSPC): -1.41 (-0.03%) to 4,535.54

  • Dow (^DJI): -74.47 (-0.21%) to 35,369.35

  • Nasdaq (^IXIC): +32.34 (+0.21%) to 15,363.52

12:00 p.m. ET: What economists are saying about the August jobs report

Friday morning’s disappointing payrolls report suggests the economy has lost some momentum given the latest wave of the coronavirus, many economists pointed out. And for investors, the print also points to a potentially more drawn-out timeline for the eventual announcement and beginning of tapering from the Federal Reserve.

Here’s what some economists had to say about the jobs report, based on emails and notes sent to Yahoo Finance: 

  • “Many people believed that the Fed would announce their taper plans at this month’s FOMC meeting and that is no longer likely. Instead, the Fed is going to need to wait to see further improvement in the job market and may not be able to announce their taper plans until the November meeting.” – Chris Zaccarelli, chief investment officer for Independent Advisor Alliance

  • “There are clear signs that the recent in the Delta variant played a key role in the weakness in the labor market. The number of workers working from home increased in August for the first time since the turn of the year when the economy stalled amid the winter COVID wave … This supports our view that the Fed will not announce taper at the upcoming September meeting.” – Joseph Song and Michelle Meyer, U.S. economists for Bank of America

  • “The economy is no longer pumping out as many new jobs and has passed the peak rehiring stage of the labor market recovery from the pandemic as most of the easy jobs for employers to fill have been completed and the Delta variant put the kibosh on new hiring at restaurants and hotels. Fed officials are unlikely to see this as a win for their maximum employment goal and this means the odds of a tapering announcement at the September meeting have gone way down and the stock market can breathe easier because the money priming the economy’s pumps will continue to flow.” – Chris Rupkey, chief economist for FWDBonds

  • Although the labor market didn’t lose ground, we certainly didn’t make up much ground either. When you dig into the numbers, there are some predictable declines in retail trade as back-to-school season is upon us but a complete stall in hospitality jobs, after adding 350,000 per month for the last half-year, presents a clear story that consumer demand is beginning to wane.” – Jason Reed, assistant chair and professor of finance at the University of Notre Dame’s Mendoza College of Business

9:33 a.m. ET: Stocks open lower after jobs report miss

Here’s where markets were trading just after the opening bell:

  • S&P 500 (^GSPC): -6.73 (-0.15%) to 4,530.22

  • Dow (^DJI): -64.58 (-0.18%) to 35,379.24

  • Nasdaq (^IXIC): -14.63 (-0.1%) to 15,316.55

  • Crude (CL=F): -$0.09 (-0.13%) to $69.90 a barrel

  • Gold (GC=F): +$15.50 (+0.86%) to $1,827.00 per ounce

  • 10-year Treasury (^TNX): +3.5 bps to yield 1.329%

9:20 a.m. ET: ‘Being in cash … isn’t going to cut it in this environment’: Strategist

Market participants are continuing to digest the implications of the August jobs report on monetary policy, and when it suggests Fed officials will be inclined to announce and begin tapering asset purchases. Many strategists, however, have noted the weak payrolls report likely pushes the formal announcement of tapering at least a bit further down the line — and further suggests benchmark rates will remain low even longer.

“I think it’s clear that the Fed is really going nowhere in this environment. We’re seeing a slowdown in jobs growth — it’s not horrible by the way, not a terrible report, but definitely challenges the narrative that the Fed has laid out because they’re looking for a string of better economic data and they want to see healing of the labor market,” Emily Roland, co-chief investment strategist at John Hancock Investment Management, told Yahoo Finance Live on Friday. “And I think this data this morning really slows that narrative down.”

“So potentially we’ll see some hinting around tapering in September, potentially a formal announcement at the November Fed meeting,” she added. “But for now our vision has been that rates are going to continue to remain low. For investors that means every little percent counts in the fixed income market. Being in cash and ultra-short duration strategies isn’t going to cut it in this environment particularly as we are continuing to see inflationary pressures build.”

9:07 a.m. ET: August jobs report disappoints as economy adds back just 235,000 non-farm payrolls 

The U.S. economy added back the fewest jobs since January last month as the Delta variant took a toll on the pace of the labor market’s recovery. 

Non-farm payrolls increased by 235,000 in August after rising by more than 1 million in July, the Labor Department said on Friday. Consensus economists were looking for 733,000, according to Bloomberg consensus data. 

By industry group, the U.S. services sector was a major contributor to the disappointing headline payroll print. Leisure and hospitality employers added back a net zero jobs in August after adding more than 400,000 in July. Manufacturing jobs, however, were a bright spot, with 37,000 of these returning to build on a gain of 52,000 from July. 

The unemployment rate improved to a fresh pandemic-era low of 5.2%, though the labor force participation rate held unchanged at 61.7%, whereas an improvement to 61.8% was expected. 

7:20 a.m. ET: Friday: Stocks edge up, investors await jobs data 

Here were the main moves in markets as of Friday morning:

  • S&P 500 futures (ES=F): +7.75 points (+0.17%) at 4,543.00

  • Dow futures (YM=F): +52 points (+0.15%) to 35,476.00

  • Nasdaq futures (NQ=F): +17.5 points (+0.11%) to 15,618.50

  • Crude (CL=F): +$0.13 (+0.19%) to $70.12 a barrel

  • Gold (GC=F): +$5.60 (+0.31%) to $1,817.10 per ounce

  • 10-year Treasury (^TNX): unchanged, yielding 1.294%

6:01 p.m. ET Thursday: Stock futures trade little changed ahead of jobs report

Here were the main moves as the overnight session kicked off Thursday evening: 

  • S&P 500 futures (ES=F): +0.25 points (+0.01%) at 4,535.5

  • Dow futures (YM=F): +3 points (+0.01%) to 35,427.00

  • Nasdaq futures (NQ=F): -4.75 points (-0.03%) to 15,596.25

© Provided by Yahoo! Finance NEW YORK, NEW YORK – AUGUST 10: People walk by the New York Stock Exchange (NYSE) on August 10, 2021 in New York City. Markets were up in morning trading as investors look to a rare bipartisan effort in the Senate to pass a massive infrastructure bill that, if passed, will infuse billions into the American economy. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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