Stocks rose, reaching fresh record levels after a closely watched report on the labor market missed expectations, possibly making a case for additional fiscal stimulus.

Each of the three major equity indexes traded higher, and the S&P 500, Dow and Nasdaq posted their best weekly gains since November. The S&P 500 rose 4.6% for the week.

Both the S&P 500 and Nasdaq also ended at record closing highs, and the Dow neared its own recent all-time closing high. Friday’s January jobs report showed that the U.S. economy returned to adding back more jobs than it lost at the start of this year, but at a slower than expected rate.

The areas of outperformance in the markets this week fit “into three of the potential rotation trades that we’re closely monitoring for 2021,” Kevin Mahn, Hennion & Walsh chief investment officer, told Yahoo Finance on Thursday. “The first being smaller cap stocks starting to outperform larger cap stocks, given the excessive valuation that large cap stocks are currently trading at … emerging stocks outperforming U.S. stocks, and then that potential rotation from growth-oriented stocks value oriented stocks.”

Over the past five days, the energy sector has been the best performing sector in the S&P 500 as crude oil prices recovered, given prospects for stronger demand for travel and fuel later this year. The financials sector also outperformed as Treasury yields firmed. The Russell 2000 has also outperformed the S&P 500 this week and so far in 2021, with small cap stocks typically leading the way higher during economic recoveries. The small-cap index hit a record closing high on Friday, and posted its best weekly gain since June.

But while some large-cap and growth stocks may seem lofty based on some traditional measures, they may also grow into these valuations given the strong earnings results posted so far for the fourth quarter, some strategists said. The majority of S&P 500 companies that have reported fourth-quarter results thus far have beaten expectations, and many by a wide margin.

“Fourth quarter earnings are really impressive thus far … one way to improve that P/E ratio [is] prices going down, or earnings go up,” Mahn added. “If we continue to see earnings growth, that could also create some more attractive investment opportunities.”

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4:00 p.m. ET: Stocks close out best week since November as stimulus hopes increase

Here’s where the three major indexes settled Friday afternoon:

• S&P 500 (^GSPC): +15.06 points (+0.39%) to 3,886.80

• Dow (^DJI): +92.25 points (+0.3%) to 31,148.11

• Nasdaq (^IXIC): +78.55 points (+0.57%) to 13,856.30

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2:10 p.m. ET: Stocks hold onto gains, pace toward strong weekly advances

Here’s where markets were trading Friday afternoon:

• S&P 500 (^GSPC): +15.08 points (+0.39%) to 3,886.82

• Dow (^DJI): +75.28 points (+0.24%) to 31,131.14

• Nasdaq (^IXIC): +69.39 points (+0.51%) to 13,847.21

• Crude (CL=F): +$0.58 (+1.03%) to $56.81 a barrel

• Gold (GC=F): +$20.80 (+1.16%) to $1,812.00 per ounce

• 10-year Treasury (^TNX): +1.8 bps to yield 1.157%

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11:14 a.m. ET: What economists are saying about the disappointing January jobs report

The January jobs report missed on net payrolls gains, as the coronavirus pandemic continued to exert pressure across the labor market.

Here’s what some economists said about the report in recent notes and emails to Yahoo Finance on Friday:

• “There were meaningful downward revisions of -159k over the prior two months revealing a weaker trend in employment activity and highlighting the stalling economy at the end of last year ... It currently shows a job market that is treading water but there are some nascent signs of better things to come.” – Bank of America economists Joseph Song and Alexander Lin

• “This is not a good start to 2021 ... Not only was payroll growth slow, but the gains were relatively concentrated in certain sectors. Compared to last month, we are adding jobs. However, more industries shed jobs in January than added them.” – Indeed economist Nick Bunker

• “Some of the sluggishness of payrolls seems to be due to seasonal adjustment oddities in construction, reported down 3K, compared to a trend of about +40K, and a 10K decline in manufacturing, where the trend is about 35K. We can see no reason for the sudden downshift in these sectors, and a reversal in February is a good bet.” – Pantheon Macroeconomics economist Ian Shepherdson

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10:12 a.m. ET: GameStop shares surge 50%, trigger trading halt after Robinhood lifts trading restrictions

Shares of GameStop (GME) surged 50% intraday on Friday after Robinhood, the online trading platform popular with retail investors, lifted trading restrictions on the stock. Still, the shares remained well below their all-time high of $483.00 from Jan. 28 at the height of the retail investor-fueled boom in the stock.

GameStop shares were briefly halted due to volatility between 10:07 and 10:12 a.m. ET.

Last week, Robinhood and some other online brokerages had placed restrictions on trading of GameStop and other highly volatile stocks that had been popularized on the Reddit forum r/wallstreetbets. The company eased these restrictions over the next several days to allow purchases of a greater number of shares of each of these stocks.

As of Friday morning, there were no trading limits on any equity securities available for trading on Robinhood, according to a company statement.

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9:52 a.m. ET: U.S. trade deficit hits highest level since 2008 in 2020

The U.S. trade deficit widened to the most in 12 years last year, as the pandemic weighed heavily on international trade and imports recovered losses faster than exports.

The trade deficit increased by 17.7% to $678.7 billion last year, with exports of goods and services sliding by nearly 16%. Imports fell by a total of 9.5%.

In December, the trade balance narrowed to $66.6 billion from $68.1 billion in November. However, this was still wider than the $65.7 billion consensus economists had been expecting for the end of last year.

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9:31 a.m. ET: Stocks open higher, Dow gains more than 150 points

Here’s where markets were trading shortly after the opening bell:

• S&P 500 (^GSPC): +16.89 points (+0.44%) to 3,888.63

• Dow (^DJI): +176.23 (+0.57%) to 31,232.09

• Nasdaq (^IXIC): +38.42 (+0.28%) to 13,817.02

• Crude (CL=F): +$0.85 (+1.51%) to $57.08 a barrel

• Gold (GC=F): +$8.10 (+0.45%) to $1,799.30 per ounce

• 10-year Treasury (^TNX): +1.1 bps to yield 1.15%

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8:45 a.m. ET: January payroll gains disappoint

The U.S. economy resumed adding back more jobs than it lost in January, as easing stay-in-place restrictions and fiscal stimulus measures out of Washington alleviated some of the pressure on the labor market. However, the number of jobs regained fell short of expectations.

Non-farm payrolls grew by 49,000 in January, coming in at fewer than half the 105,000 expected.

Plus, the depth of the job losses in December were revised to be greater than previously reported. The economy shed 227,000 jobs in December, versus the 140,000 previously reported.

While the unemployment rate improved to 6.3% from 6.7%, the drop coincided with a decline in the labor force participation rate.

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7:15 a.m. ET Friday: Futures extend gains ahead of January jobs report

Here’s where markets were trading ahead of the opening bell Friday morning:

• S&P 500 futures (ES=F): 3,882.75, up 18.25 points or 0.47%

• Dow futures (YM=F): 31,091.00, up 141 points or 0.46%

• Nasdaq futures (NQ=F): 13,591.75, up 44.25 points or 0.33%

• Crude (CL=F): +$0.49 (+0.87%) to $56.72 a barrel

• Gold (GC=F): +$10.20 (+0.57%) to $1,801.40 per ounce

• 10-year Treasury (^TNX): +1.2 bps to yield 1.16%

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6:03 p.m. ET Thursday: Stock futures open higher

Here’s where markets were trading Thursday evening as overnight trading kicked off:

• S&P 500 futures (ES=F): 3,864.75, up 0.25 points or 0.01%

• Dow futures (YM=F): 30,955.00, up 5 points or 0.02%

• Nasdaq futures (NQ=F): 13,555.5, up 8 points or 0.06%

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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