The NASDAQ Composite and benchmark S&P 500 declined during Friday’s late session but remained well off their respective intraday lows, with market participants trying to erase earlier losses. United States equities saw a blow while Treasury yields soared as investors switched bets toward the more hawkish-than-anticipated Fed Reserve reaction to a massive US jobs data.
Meanwhile, November NFP (non-farm payrolls) contributed to the price actions as it indicated employers on a higher-than-expected hiring spree in November and increasing wages despite prevailing recession fears. The DJIA trades at 34,294.51, 0.29% down or -100.51. Also, S&P 500 lost 0.55% (-22.49) to 4054.08, and NASDAQ Composite dropped 0.76% (-87.61) to 11,394.84.
Hotter-than-Anticipated Jobs Data
The United States labor market report revealed that NFP gained 263K jobs in November, higher than economists’ anticipation of 200K jobs. Furthermore, hourly earnings (average) soared from October’s 0.5% to 0.6%. Traders had priced a 0.3% uptick. Meanwhile, the unemployment rate offers a lively spot in the latest report, with the same unaltered at 3.7%.
Nevertheless, the Federal would have enjoyed an upsurge. The figures indicated that hiring firms aren’t scared of heightened interest rates. First & foremost, they should require employees. Secondly, the companies are confident about making profits, regardless of the increased rates.
Hospitality and Leisure Industry Led Job Gains
The report’s internal number showed that the leisure & hospitality sector led to an uptick in the labor market, adding 88K positions. Nevertheless, it isn’t a surprise, as consumers can travel and visit restaurants following pandemic-driven lockdowns.
Moreover, the construction sector added 20K positions despite four successive 0.75% rate upticks that have deteriorated the housing sector.
Immediate Response – Pessimistic for Stocks
After witnessing a massive headline figure, sellers ensured immediate dominance over the stock market. Meanwhile, an uptick in hourly wages potentially provided the crushing hit. Nevertheless, prices steadied following the first sell-off, with traders attempting to annul earlier losses.
The shocking updates forced investors/traders to switch bets on possible future hikes. Market players wagered that the Federal might increase interest rates to 4.92% next year in March – an increase from 3.75% to 4%. Moreover, they forecast a 5% – 5.25% range for May next year. That’s an upsurge from the prior report of 4.74% – 5%.
Bearish News Might Not Last
Analysts believe the stocks market would have endured a session-long sell-off if the non-farm payroll data was bearish. Meanwhile, the selling momentum faded quickly. That confirms that long liquidations by opportunists betting on an optimistic report fueled the weakness.
Market players should beware that the report looks backward. The labor situation may not display weakening signals until 2023 Q1, considering the increasing jobless claims & latest layoffs (especially within the tech sector).
Enough job loss by that time might encourage the Federal to trim its hikes to 25bp and not the forecasted 50bp for December.
Near-Term Outlook
Yesterday’s jobs report welcomes a ten-day timeframe that may feature two-sided, volatile trading as market players jockey for positions ahead of the Federal Reserve’s rate decision. Prices might chop around until 13 December during the November consumer inflation data release – a day ahead of the Federal’s interest rate decision & financial policy report on 14 December. Time will tell what the markets will have by then.
We have more financial updates coming your way. Stay tuned.