Wall Street still seen higher even after US job creation drops sharply in December

8.55am: Jobs data drops sharply US stock futures continued to point to a higher open on Friday even as job creation fell for the first time in eight months in December, pressured by a record surge in coronavirus (COVID-19) cases. US non-farm payrolls fell by almost twice as many as they had been forecast to rise in December, dropping by 140,000, though the unemployment rate remained unchanged at 6.7%. Economists had expected the US economy to add 71,000 jobs in the final month of the year, down from 245,000 additions in November. Robert Alster, CIO at Close Brothers Asset Management commented: “After several months of encouraging improvement, the closely watched employment data coming out of the US has significantly slumped. The double whammy of Thanksgiving and Christmas celebrations propelled coronavirus cases and consequently restrictions were re-introduced in many states, hindering many businesses on the road to recovery. “With US cases now exceeding twenty-million and the virus surging globally, Biden is confronted with the challenge of achieving an assertive health policy that doesn’t damage the economy further. To do this whilst supporting a nation reeling from the chaos on Capitol hill will be no mean feat after his inauguration on the 20th.” 7.35am: Record highs to be extended With the release of December’s US jobs data about an hour away, US stocks are expected to open mostly higher. That could obviously change if the numbers are especially surprising but at present, the expectation is that the Dow Jones Industrial Average will open around 81 points higher at 31,122 and the S&P 500 8 points to the good at 3,814. The Nasdaq Composite, which last year often made headway while the other two indices retreated, finds the boot is on the other foot, with spread betting quotes indicating a 75 point fall for the tech-heavy index, which is expected to open at around the 12,992 level. “The first US jobs report of 2021 is unlikely to garner the sort of attention it once did, for investors are still largely ignoring pandemic-hit data as they look forward to more normal times ahead. That said, there will come a time when economic data will be important again as central banks decide whether to tighten their respective policies again once the recovery starts to take shape, hopefully in the not-too-distant future,” said Fawad Razaqzada, an analyst at ThinkMarkets. “In fact, judging by the recent price action on longer-dated US bonds, with 10-year yields spiking to levels not seen since March, it looks like investors are beginning to look ahead and expecting longer-term interest rates to rise. This is why the US dollar has managed to find a bit of support over the past couple of days, and why precious metals have struggled this morning. Friday’s jobs report may provide a reality check of the current situation,” he suggested. Craig Erlam at OANDA said has been “some week”, referring to the events on Capitol Hill. “Thankfully - and I wouldn't bet against being proven wrong - at least on the US political level, I think the worst of the drama may be behind us. This week was a massive step too far and the video put out by the President suggests he knows it too and may now opt to de-escalate. “Joe Biden will become President on 20 January and the topic of conversation can turn back to getting this horrific wave of Covid-19 under control and the economic recovery. The stimulus that was passed at the end of last year avoided a cliff-edge but doesn't come close to the Democrats ambitions and they now have the numbers, just, to do something about it,” Erlam said. Talking of the coronavirus, 275,000 new cases were reported in the US last week, 19.9% higher than on Thursday the week before. The seven-day average of cases rose to a new high of 228,000. “The seven-day average is set to rise further with the release of today's data, because testing activity was depressed on New Year's Day, but we hope this will mark the peak, or at least the end of the rapid phase of the post-holiday surge in cases,” said Pantheon Macroeconomics. Five things to watch for on Friday: Shares in Boeing Co (NYSE:BA) are likely to be a focal point today following news the aircraft maker has agreed a US$2.5bn settlement with the Department of Justice to avoid charges over two crashes involving its 737 MAX aircraft in 2018 and 2019 Apple Inc (NASDAQ:AAPL) may also be eyed after South Korean carmaker Hyundai confirmed last night that it is in talks with the tech giant to develop a self-driving car. The news may also cause some ructions for Tesla Inc (NASDAQ:TSLA) Elsewhere, Moderna Inc (NASDAQ:MRNA) shares could be line for a bump after its COVID-19 vaccine was approved for use by UK regulators, meaning a total of three vaccines can now be used in the country Bitcoin is also likely to attract attention as the cryptocurrency was once again breaking records as its value surged past US$40,000 Investors will also be keeping an eye on political developments in Washington DC as demands for Trump’s removal from office grow louder following Wednesday's mob attack on the Capitol building