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Even with the announcement of labor report numbers that fell below expectations, markets still saw gains on Friday. The latest monthly unemployment data reported showed a decrease in the U.S. unemployment rate from 6.7 to 6.3 percent as more Americans stopped looking for work. Discouraged workers are not counted as unemployed if they give up on finding a job. The U.S. economy created 49,000 net new jobs in January, almost hitting the consensus forecast of 50,000 jobs.
On Friday, the S&P 500 saw a 0.39 percent increase, the Dow increased by 0.30 percent, and the Nasdaq gained 0.57 percent on the day. These were record closing highs for the S&P 500 and the Nasdaq. The Dow followed and nearly reached its recent record-high. This past week marked the top-performance of weekly gains for the Dow, Nasdaq, and S&P 500 since November 2020, with the S&P 500 the weekly-gain frontrunner among the indexes at a 4.6 percent increase.
The Russell 2000 Index likewise closed the week with a 1.4 percent gain on the day for a record daily closing. This represented the small-cap index’s top daily gain since June of last year and reflects the expected relatively quicker trajectory of small-cap stocks within the context of the broader U.S. economic recovery.
For the week, the Russell 2000 Index gained 7.70 percent, the Nasdaq 6.01 percent, the S&P 500 Index 4.65 percent and the Dow Jones Industrial Average 3.89 percent.
GameStop Corp. (GME), at the center of the current short-squeeze phenomenon, continued to hold the attention of traders over another volatile week of trading activity. GameStop closed on Friday with a 19.20 percent gain. While its daily close is well below the $483.00 record-high from late January, it still reflects a massive price surge of 177 percent since the rally took off this year. Online trading platform Robinhood announced Friday that it will no longer restrict trading activity for the stock, which allowed for another round of stock purchases and prompted a 50-percent price surge at a point.
For the week, the energy sector stood out in the S&P 500 as a top performer. Crude oil prices, which had a 10-percent rise on the week. On Friday, Crude Oil (CL=F) was up 1.49 percent an increase to $57.07 a barrel. The $60 per barrel benchmark is being closely monitored as an indicator of a probable increase in production levels. SPDR Energy (XLE) advance 8.24 percent. First Trust ISE Revere Natural Gas (FCG) climbed 9.04 percent.
Gold (GC=F) prices also posted an increase on Friday of 1.34 percent, closing at a $24 increase on the day to $1,815.20 an ounce. After its notable upward trend catching attention earlier in the week, Silver (SI=F) prices continued to close Friday with a gain of 3.05 percent on the day of $0.80 an ounce to $27.03.
The 10-year Treasury bond yield increased 1.8 basis points on Friday for the day to 1.157 percent.
SPDR Financials (XLF) advanced 6.66 percent, SPDR Consumer Discretionary (XLY) 6.33 percent and SPDR Communication Services (XLC) 6.77 percent. Rising interest rates boosted financials with the 10-year yield closing at a new post-pandemic high. Strong earnings lifted consumer discretionary and communication services.
Investors mostly shrugged off a rebound in the dollar this week. The U.S. Dollar Index gained 0.45 percent, but iShares MSCI Emerging Markets (EEM) climbed 5.54 percent. The developed market iShares MSCI EAFE (EFA) did lag U.S. markets though, it managed only a 3.20 percent rise this week.
While employment has been slow to rebound in 2021, the manufacturing and service PMIs both were strong. The ISM manufacturing PMI came in at 58.7 percent, down from 60.7 percent in December, but still a very positive number. The services PMI was also 58.7 percent, up from 57.2 percent and ahead of the consensus that was looking for a drop amid coronavirus lockdowns.
Motor vehicle sales hit an annualized pace of 16.6 million in January, up from 16.3 million in December.
Earnings seasons continued its positive streak with Amazon (AMZN) crushing forecasts. Sales hit $125.56 billion; the first time Amazon crossed the $100 billion level. Earnings were $14.09 per share, nearly double the $7.23 consensus forecast. Along with Tesla, Amazon powered the consumer discretionary sector this week.
Alphabet (GOOGL) lifted the communication services sector after its shares spiked post-earnings. Google gained 14.37 percent on the week.
This week’s earnings beats have swung S&P 500 blended earnings growth to positive 1.7 percent, up 11 percentage points from where analysts forecast coming into 2021.

Equities shrugged off a rising dollar on Monday and rebounded from last week’s losses. Technology was the strongest sector, lifting the Nasdaq 2.55 percent. The Russell 2000 Index climbed 2.53 percent, the S&P 500 Index 1.61 percent and the Dow Jones Industrial Average 0.76 percent.

Shares of Tesla (TSLA) climbed 5.83 percent and Amazon (AMZN) 4.26 percent on Monday. That boosted SPDR Consumer Discretionary (XLY) 2.60 percent. SPDR Technology (XLK) rose 2.51 percent, SPDR Real Estate (XLRE) 2.26 percent and SPDR Communication Services (XLC) 1.87 percent.

Short-interest in GameStop (GME) reportedly fell on Monday and shares sank an even $100.00 or 30.77 percent. It’s unknown if the squeeze is over, but if it is, GME could fall another 90 percent or so, back to where it was trading before the squeeze began. Last week we sent out a sell alert on SPDR S&P Retail (XRT) because the largest holding in the fund is GameStop, a consequence solely of its incredible rally. Investors should stay away from that ETF until all the air comes out of GME.

The ISM Manufacturing PMI eased to 58.7 percent in January, down from 60.7 percent in December. Any reading above 50 signals expansion.  The ISM services PMI will be out midweek.

January’s employment report will be released on Friday. Economists project 105,000 new jobs, unemployment steady at 6.7 percent and 0.3 percent wage growth.

Big Tech and biotech will dominate a busy earnings week. Tuesday brings Amazon (AMZN), Google (GOOGL), Alibaba (BABA), Pfizer (PFE), Exxon Mobil (XOM), Amgen (AMGN), United Parcel Service (UPS) and ConocoPhillips (COP).

On Wednesday, we will receive reports from PayPal (PYPL), Qualcomm (QCOM), Biogen (BIIB), AbbVie (ABBV), Boston Scientific (BSX), eBay (EBAY) and Spotify (SPOT).

Nokia (NOK), Bristol-Myers Squibb (BMY), Merck (MRK), Ford (F) and Gilead Sciences (GILD) report on Thursday.

The week closes out with Regeneron (REGN), Illinois Tool Works (ITW) and Cardinal Health (CAH).

This past volatile trading week for stocks culminated for losses on Friday for all major Indexes. The markets were significantly affected by the unprecedented trading chaos behind wildly popular and drastically-shorted stocks targeted by groups of retail investors, such as members of a popular Reddit forum, including GameStop (GME) and several others.

The Dow dropped 2.03 percent on Friday to its lowest point over the last six-week period. Of the 11 sectors, Energy and Information Technology declined, with Friday losses of 3.11 percent and 2.64 percent, respectively. The Nasdaq and the S&P 500 followed closely behind the Dow for the day with losses of 2.0 percent and 1.93 percent, respectively. The Russell 2000 Index also fell 1.56 percent for the day.

For the week, the Dow Jones Industrial Average slipped 3.27 percent, the S&P 500 Index 3.31 percent, the Nasdaq 3.49 percent and the Russell 2000 Index 4.39 percent.

Gamestop shares closed at $328.24 on Friday, an incredible 400-percent gain over its closing price at the end of last week, $65.01. Likewise, the secondary targets for buying and holding by the groups of online retail investors (because they are believed to be heavily-shorted) also saw increases in share prices on Friday, including AMC (AMC), BlackBerry (BB), Express (EXPR), Bed Bath & Beyond (BBBY) and Nokia (NOK). Meanwhile, major hedge funds started incurring billions of dollars in losses due to the short positions they held in those companies.

As an indicator of the impact of the magnitude of the sky-rocketing share values of these companies, and Gamestop in particular, the Cboe Volatility Index, which showcases the stress level of the markets, rose 9.5 percent on Friday. This severe volatility triggered the Securities and Exchange Commission (SEC) to announce publicly on Friday that will continue to be monitoring the short-squeeze situation involving Gamestop and companies in similar positions. This includes reviewing the controversial decision of some no-fee brokerage firms, such as RobinHood, to restrict traders’ ability to purchase shares of volatile stocks, including GameStop.

Several ETFs have exposure to GameStop. The most important one, in terms of the size of the fund and the weight of GME, is SPDR S&P Retail (XRT). On Thursday we recommended investors take profits if they held XRT since GME climbed to 20 percent of assets from only a few percentage points at the start of the year. XRT was about $70 per share before the GameStop squeeze began, or about 20 percent lower than the $88 per share it closed at on Friday.

Novavax Inc. (NVAX) shares leaped 65 percent on Friday on the announcement that the pharmaceutical company’s coronavirus vaccine achieved an 89-percent efficacy rate from clinical data. On the other hand, shares of Johnson & Johnson (JNJ) dropped 3.56 on the day based on disappointing reports that its COVID-19 vaccine candidate was only 66 percent effective in late-stage clinical trials.

Corporate earnings reports for the fourth quarter published on Friday showed that Chevron (CVX) posted losses for the last three quarters in a row and had its worst overall year since 2016. Chevron shares fell 4.3 percent on the day.

Eli Lilly & Co. (LLY) shares dropped 1.0 percent after the company released a positive earnings report well above expectations and with the potential for significant growth based on the success of its coronavirus treatments.

Skyworks Solutions Inc. (SWKS), a primary chip supplier for Apple (APPL), saw its shares jump 5.9 percent on the day after the release of a positive earnings report above estimates.

Earnings season remained strong this week. The blended earnings growth rate between reported earnings and remaining estimates in the S&P 500 Index climbed to negative 2.3 percent. At the current pace of earnings beats, S&P 500 earnings could turn positive by the end of fourth quarter earnings season. American Airlines (AAL) was one of the big winners this week. It beat estimates and shares climbed 8.57 percent.

Crude Oil Futures were down by 0.38 percent after trading closed for the day to $52.14 per barrel. Brent Crude Futures were up by 0.11 percent to $55.10 per barrel at the close of the trading week.

Gold gained 0.47 percent on the day and rose to $1,849.80 an ounce. Silver was likewise up 4.39 percent Friday to $27.06 an ounce. The U.S. dollar Index rose 0.09 percent on the day to 90.53.

The 10-Year Treasury bond yield was up 0.014 percent to a rate of 1.064 percent on Friday.

The economy grew at a 4.0 percent pace in the fourth quarter, slightly missing economist forecasts. Consumer spending decreased 0.2 percent, but that was better than forecast. Personal income climbed 0.6 percent aided by stimulus checks.

The Pending Home Sales Index dipped 0.3 percent for December, however pending home sales for the same month were up 21.4 percent relative to December of 2019. New home sales hit an annualized pace of 842,000 over the month.