U.S. Market Wrap and Forecast for Friday

Major index benchmarks added to weekly gains ahead of the January Non-Farm Payrolls report. The Russell-2000 small cap index outperformed blue chips, lifting more than 2% to an all-time high. Chip stocks added a few points after Wednesday’s reversal while the 30-year Treasury bond stuck its nose above 2.00% for the first time since March 2020. Fintech issues shined after another strong quarter from market leader PayPal Holdings Inc. (PYPL).

Banks Get Bought

Speculative favorite DraftKings Inc. (DKNG) spiked into October resistance, completing the last leg of a 60-point round trip. High short interest small caps continued to deflate, signaling the demise of last week’s biggest story, which doesn’t seem too important in retrospect. Gamestop Inc. (GME) fell another 42% into the low 50s, marking the lowest low since Jan. 22. More importantly, the stock has dropped 89% off the Jan. 28 peak, trapping many Kool-Aid drinkers.

Dow component JPMorgan Chase and Co Inc. (JPM) surged into a test of January’s all-time high but the stock hasn’t broken out yet because it’s still dealing with tough resistance at the 2020 high above 140. This should be a great year for commercial banks worldwide, with the early stages of an inflationary environment widening the yield curve while generating the strongest tailwinds for the financial sector in more than a decade.

Heading Into the Weekend

Wall Street is looking for Friday’s report to add about 50,000 new jobs, much lower than the 174,000 jobs reported in Wednesday’s ADP release. The divergence between expectations and reality is more important than actual metrics at this juncture because everyone knows that millions are still out of work, waiting for restaurants, fitness centers, and travel destinations to rebuild their businesses after the pandemic runs its course.

Major benchmarks hovered around bull market highs at Thursday’s close, raising the potential for breakouts in coming sessions. The Biden administration may need to pull a few legislative tricks to pass the gigantic stimulus bill but the odds are good and Democrats don’t want to make the same mistake they made at the start of the Obama administration. Specifically, the last president made it clear there’s no advantage in seeking ‘unity’ with the other side of the aisle.

For a look at all of today’s economic events, check out our economic calendar.