Stock Market Today: Investors Look Past Weak Jobs Report

Stocks closed the week with a timid move higher as investors digested more positive breadcrumbs on COVID relief as well as a sign that the economic recovery is perhaps not as robust as hoped.

The Labor Department on Friday reported a slim 49,000 jobs were added in January, and a drop in the unemployment rate, from 6.7% to 6.3%, isn't as favorable as it seems.

"The headline unemployment number keeps moving down, which is normally a good thing," says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, "but the labor force participation rate has been coming down as well, indicating that more people are dropping out of the headline unemployment number."

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Rick Rieder, BlackRock’s chief investment officer of Global Fixed Income, was more sanguine.

"With rolling lockdowns, regional divergences, government hiring dynamics, etc., the information at the aggregate level (+49,000 in payroll gains) was not terribly revealing, though we’re heartened by the improvement in temporary hiring (a leading sector, with 81,000 jobs gained)," he says. "Overall, we continue to think that U.S. economic growth will surprise to the upside and have been heartened by a number of recent economic and corporate earnings indicators."

Also Friday, President Joe Biden sought to assure Americans waiting for financial relief, saying, "I'm not cutting the size of the checks. They're going to be $1,400 – period." That was enough to lift most of the major indices to new highs for the second consecutive day.

The S&P 500 (+0.4% to 3,886), Nasdaq Composite (+0.6% to 13,856) and Russell 2000 (+1.4% to 2,233) all closed with new records Friday, while the Dow Jones Industrial Average (+0.3% to 31,148) is just 40 points, or a 0.1% gain, from its all-time high of 31,188 set on Jan. 20.

Other action in the stock market today:

• U.S. crude oil futures climbed yet again, up 1.0% to settle at $56.78 per barrel.
• Gold futures rebounded by 1.2% to close out Friday at $1,813.00 per ounce.
• Bitcoin prices, at $37,528 on Thursday, edged its way 0.6% higher to $37,754. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

Safety First!

The more the market keeps scratching at new highs, the more market observers are preaching caution.

Stocks appear to be pricing in an awfully-great-case scenario – one that seems to ignore the risk of "the spread of stronger and more contagious COVID-19 mutations that are already seen in some countries," says James McDonald, CEO and chief investment officer of alternative investment manager Hercules Investments, adding that "the stock market is as stretched as ever."

And Zaccarelli chimes in on Biden's looming stimulus package: "Our concern would be in the short term, the stimulus bill is a buy the rumor, sell the fact type of situation and the stock market will actually head lower because the good news was already priced in."

That doesn't mean you should flee for the exits, but some investors might consider battening down the hatches. For instance, some coronavirus stocks are enjoying renewed interest of late and could climb in value if new COVID variants complicate America's fight against the coronavirus. So too could a number of other tech stocks.

Also worth considering are good old-fashioned defensive plays. We've recently analyzed 11 defensive stocks, mostly scattered across telecom, healthcare and consumer staples, that boast a number of qualities that investors will want in their corner should a market correction be just around the corner. Check them out!