Dow Jones Industrial Average Rose as Jobs Data Don’t Matter. Stimulus Does.

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Stocks rose Friday, pushing through a weak November jobs report. Markets continue pricing in fiscal stimulus happening sooner rather than later. All three major indexes set new intraday highs, and closed at records.

The

Dow Jones Industrial Average

rose 248.74 points, or 0.83%, to close at 30,218.26. The

S&P 500

rose 32.40 points, or 0.88%, to end at 3,699.12, and the

Nasdaq Composite

rose 87.05 points, or 0.70%, to close at 12,464.23.

The two biggest gainers in the S&P 500 were

Occidental Petroleum

(OXY) and

Diamondback Energy

(FANG), both up 13%. The two energy stocks are hard-hit names; both have seen half their market value wiped out so far in 2020. The price of crude oil rose 0.92% to $46.06 per barrel as Organization of the Petroleum Exporting Countries, or OPEC, has agreed to roll back production cuts to 7.2 million barrels per day through April 2022 from a current rate of 7.7 million per day. Initially, the agreement had production cuts moving to 5.8 million barrels per day. The energy sector soared, particularly smaller companies, which have extremely high debt burdens and more to gain from an upturn in oil prices.

The most important factor moving stocks Friday was yet another inch closer to Congress getting a fiscal stimulus packaged done during the lame duck session. President Trump said a deal was becoming very likely and President-Elect Joe Biden said there may be more fiscal spending after the next stimulus package. Closer to noon Friday, House Speaker Nancy Pelosi said stimulus talks were gaining momentum.

This comes as economic data have been of late weak and Friday was no exception. The U.S. added 245,000 jobs in November, below the consensus estimate for 432,000 and below October’s jobs gain of 610,000. The surge in Covid-19 cases isn’t helping. “There’s some expectations that with additional lockdowns, we could have some softer numbers,” Tony Bedikian, head of global markets at Citizens Bank, told Barron’s.

But investors can look past the weakness if they are confident that the $908 billion bipartisan spending bill can pass soon. “The jump in bond yields and rise in the equity markets is an abnormal response to today’s weaker-than-expected employment report,” wrote David Donabedian, chief investment officer of CIBC Private Wealth Management, in emailed remarks to the media. “[T]he markets believe today’s weak economic news will mean that a fiscal stimulus package is more likely to happen.” The bill would hand cash over to struggling small businesses and households and hold them over before a vaccine arrives. And indeed, treasury yields rose, with the 10-year yield reaching 0.98% a post-pandemic record. The previous post-pandemic high was 0.96% on Nov. 11. The rising yield signifies firming inflation, and economic-growth expectations.

The market may have been pricing in fiscal stimulus for some time now, but investors are growing more optimistic. The probability for more stimulus before President Donald Trump leaves office, according to a survey of Evercore’s clients, reached 50/50 this week, the bank said in a note. A few weeks ago, 80% of respondents didn’t expect a bill this year.

With interest rates rising, bank stocks continued their impressive run, with the

SPDR S&P Bank

ETF (KBE) up 2% Friday. The fund is up 46% since Sept. 23, crushing the S&P 500’s gain of 14% in that time frame.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com