U.S. stock markets closed mixed on Friday following the release of “not-so-cool and not-so-hot” labor market data. Market participants remained more hopeful for another interest rate cut in December after November jobs data. The S&P 500 and the Nasdaq Composite ended in positive territory while the Dow finished in negative zone. Last week also, the S&P 500 and the Nasdaq Composite ended in green while the Dow finished in red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) slipped 0.3% or 123.19 points to close at 44,642.52. At intraday high, the blue-chip index was up more than 158 points. Notably, 16 components of the 30-stock index ended in negative territory while 14 in positive zone.
The major loser of the Dow was UnitedHealth Group Inc. UNH. The stock price of the medical and health insurer tumbled 5.1%. UnitedHealth Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq Composite finished at 19,859.77, advancing 0.8% or 159.05 points due to strong performance by technology behemoths. In intraday, the tech-laden index posted its new all-time high of 19,863.14. The index also registered its 36th closing high this year.
The S&P 500 gained 0.3% to finish at a new closing-high of 6,090.27. In intraday, the Wall Street’s benchmark posted its new all-time high of 6,099.97. The index also registered its 57th closing high this year. Three out of 11 broad sectors of the broad-market index ended in positive territory while eight in negative zone.
The Consumer Discretionary Select Sector SPDR (XLY) and the Communication Services Select Sector SPDR (XLC) surged 2.1% and 0.9%, respectively. On the other hand, the Energy Select Sector SPDR (XLE) and the Utilities Select Sector (XLU) tumbled 1.7% and 1.2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 5.7% to 12.77, marking its lowest finish since mid-July. A total of 12.99 billion shares were traded on Friday, lower than the last 20-session average of 14.5 billion. Decliners outnumbered advancers on the NYSE by a 1.01-to-1 ratio. On Nasdaq, a 1.56-to-1 ratio favored advancing issues.
Mixed Labor Market Data
The Department of Labor reported that the U.S. economy added 227,000 jobs in November, beating the consensus estimate of 200,000. The metric for October was revised upward to 36,000 from 12,000 reported earlier. October’s number was significantly lower due to impacts from Hurricane Milton and the Boeing strike. The metric for September was also revised upward to 255,000 from 32,000 reported earlier.
The unemployment rate increased to 4.2% in November from 4.1% in October. The consensus estimate was also 4.2%. The unemployment rate edged up due to decline in both labor force and labor force participation rate. The real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) came in at slightly higher to 7.8% in November.
The average hourly wage rate increased 0.4% in November, in line with the prior month but higher than the consensus mark of 0.3%. Year over year, the average hourly wage rate increased 4% in November, higher-than-the consensus mark of 3.9%. Average workweek was 34.3 in November. The metric for October was revised marginally downward to 34.2 from 34.3 reported earlier.
Rate Cut Hope Rises
Following the release of the November labor market data, market participants are more hopeful of another round of reduction in the benchmark lending rate in December. November’s job addition was moderately higher than expectations coupled with a marginal increase in the unemployment rate.
Market participants believe that gradually reducing inflation rate and soli fundamentals of the U.S. economy will pave the way for a soft landing. The Fed reduced the market interest rate by 75 basis points in September and November to a range of 4.5-4.75%.
The CME FedWatch interest rate derivative tool currently shows an 86% probability that central bank will cut the Fed fund rate by another 25 basis points in December. This probability was around 66% at the beginning of last week. If this materializes, total reduction in the Fed fund rate will be 1% in 2024.
Economic Data
The University of Michigan consumer sentiment preliminary index for December came in at 74, higher than the consensus estimate of 73. The final index for November was 71.8. The preliminary sub-index for current economic conditions in December climbed to 77.7 from the final index of 63.9 in November. The preliminary sub-index for consumer expectations in December dropped to 71.6 from the final index of 76.9 in November.
The one-year inflation expectations rose from 2.6% last month to 2.9% this month, the highest reading in six months but within the 2.3-3.0% range seen in the pre-pandemic two years. However, long-run (3-5 years) inflation expectations edged down from 3.2% last month to 3.1% this month.
Weekly Roundup
Last week was a mixed one for Wall Street. The Dow sild 0.6%, while the S&P 500 and the Nasdaq Composite appreciated 1% and 3.3%, respectively. Both &P 500 and the Nasdaq Composite recorded their three consecutive positive weekly closes.
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