S&P 500 and Nasdaq: US Stocks Rally on Jobs Beat, Tech Stocks Face Resistance

Stocks Rally as NFP Blows Past Expectations at 130K Jobs

The major U.S. stock indexes are called higher based on the futures trade after the January Non-Farm Payrolls report beat expectations, helping to boost optimism over the strength of the economy.

At 15:00 GMT, the Dow is trading 50311.75, up 123.61 or +0.25%. The S&P 500 Index is at 5963.49, up 21.68 or +0.31% and the Nasdaq Composite is trading 23136.237, up 33.763 or +0.15%.

Today’s Bureau of Labor Statistics’ January Non-Farm Payrolls report showed job growth of 130,000 last month, surpassing economists’ estimates of about 55,000. The report also showed a sizable increase from December, which was downwardly revised to 48,000.

The unemployment rate came in at 4.3%, below the 4.4% estimate. Average Hourly Earnings rose 0.4% month over month, higher than the 0.3% forecast.

The report served as good news for investors after yesterday’s weaker-than-expected retail sales report weighed on sentiment.

Yields and Dollar Reverse as Strong Jobs Data Shifts Sentiment

The employment news also boosted Treasury yields and the U.S. Dollar, reversing earlier losses.

With the labor market news out of the way, investors will have two trading days to shake off the recent negativity caused by worries over the software sector. On Tuesday, shares of several financial services companies were hit with a wave of selling after Altruist launched a new AI-powered tax planning tool.

Rotation Continues: Dow Leads as Old Economy Stocks Surge

On the opening, the strength remains in the Dow as investors continue to rotate into “Old Economy” stocks, putting the tech-weighted Nasdaq in a relatively weak position. The S&P 500, which is comprised of a little of both old economy and high-risk technology, has been strengthening nonetheless.

Today, traders will be watching stocks that would benefit from an accelerating economy, including Vertiv (+22%), Caterpillar (+3%), GE Vernova (+4%), and Eaton (+5%).

The jobs data news is bullish, but the Fed said at its January meeting that their focus has shifted to inflation, with the release of the latest consumer inflation report coming out on Friday.

S&P 500: Record High at 7002.28 Within Reach

Technically, the S&P 500 Index (SPX) is higher and in a position to challenge its record high at 7002.28. Short-term support is 6917.50 to 6891.25, with the major trend indicator the 50-day moving average at 6894.90.

Nasdaq: 50-Day MA at 23393.50 is the Key Test

The Nasdaq Composite Index (IXIC) is also higher but facing a potential headwind at the 50-day moving average at 23393.50. Overcoming it, however, will put the index in a bullish position, opening the door for a potential run at the major tops at 23988.27 and 24019.99.

The market is also testing a retracement zone at 23224.75 to 23405.00. This is also a potential resistance zone.

The key to extending the rally will be overcoming the resistance cluster at 23393.50 to 23405.00 with strong buying volume.

Dow: Early Sign of Weakness at Record High?

The Dow Jones Industrial Average is also strong, but there is one concern. The early rally stopped at 50499.04, short of the record high at 50512.79. This could be an early sign of weakness. If it turns lower for the session, then look for a possible pullback into the uptrend line at 49938.00.

More Information in our Economic Calendar.