Equities backed off record highs Friday after the December employment report proved to be a dud, showing the addition of just 145,000 new roles in the final month of 2019, well below the 160,000 new jobs economists were expecting. Unemployment remained at 3.5%.
- The S&P 500 lost 0.29%
- The Dow Jones Industrial Average inched lower by 0.46%
- The Nasdaq Composite retreated by 0.27%
- On a day that should have favored defensive fare, Pfizer (NYSE:PFE) paced the Dow with a gain of 1.41%
In addition to the jobs number missing estimates and the already low jobless rate holding steady, wages rose just 2.9% last month, below the 3.1% economists expected. In better news, the broader unemployment rate, the one that includes discouraged workers and the underemployed, fell to 6.7%.
The October and November numbers were revised slightly lower, adding to the headwinds for riskier assets today. All that taken into account, declines for the major averages to close the week were palatable, though just nine of the Dow’s 30 members were in the green in late trading.
Pfizer the Fantastic
Among the five largest domestic pharmaceuticals stocks, Pfizer was the biggest dog in 2019, but every dog has its day, eventually. That moment could be arriving for Pfizer.
Upon shedding its generic drugs unit view the Mylan (NYSE:MYL) transaction announced last year, Pfizer is “set to emerge is a best-in-class growth story on [its] smaller, more innovative base,” RBC Capital Markets analyst Randall Stanicky said in a recent note.
On Thursday, Pfizer reached a deal with eFFECTOR Therapeutics calling for a $15 million upfront payment and up to $492 million down the road that gives Pfizer some exposure to the elusive eIF4E market; eIF4E is found in a range of cancers.
Effector has zotatifin, an eIF4A inhibitor, that is in clinical trials for testing in solid tumors.
Bad News Duo
In late trading, Boeing (NYSE:BA) and Travelers Companies (NYSE:TRV) were tussling for the dubious distinction of being the Dow’s worst-performing name today. In the case of Travelers, the Friday malaise is easy to explain as the stock was downgraded by Keefe, Bruyette & Woods to “underperform” from “market weight.” The research also lowered its price target on Travelers to $125 from $144. That new target is below the $135 area at which the stock closed today.
Predictably, Boeing’s woes today are a bit more complex. Suffice to say company documents revealing that employees described the controversial 737 MAX jet as “designed by clowns, who in turn are supervised by monkeys” and that the now grounded passenger plane was subject to “piss poor design” didn’t help Boeing stock today.
Those communications are dated April 2017, but despite the age, those comments call into question Boeing’s ability to get the 737 MAX back in the skies.
“We regret the content of these communications, and apologize to the [Federal Aviation Administration], Congress, our airline customers, and to the flying public for them,” the company said.
Defensive Due
As noted above, today was the type of day when investors favored defensive names, providing some follow through on Thursday’s gains by Coca-Cola (NYSE:KO) and Procter & Gamble (NYSE:PG). Today’s upside for those staples giants was modest, but it was enough to place the stocks among the Dow winners, a small group on Friday to be sure.
Bottom Line on the Dow Jones Today
The big banks start reporting earnings next week, meaning fourth-quarter earnings season is upon us. On that note, the bar has been lowered for companies in nearly every sector, meaning they had better exceed these lowered estimates.
“In terms of estimate revisions for companies in the S&P 500, analysts made larger cuts than average to earnings estimates for Q4 2019 during the quarter,” said FactSet in a note earlier today. “On a per-share basis, estimated earnings for the fourth quarter decreased by 4.7% from September 30 through December 31. This percentage decline was larger than the five-year average (-3.3%), the 10-year average (-3.1%), and the 15-year average (-4.4%) for a quarter.”
As of this writing, Todd Shriber did not own any of the aforementioned securities.