November Jobs Data And Investor Sentiment Drive U.S. Stocks Up

The U.S. stock market surged on Friday, December 8th, 2023, driven by better-than-expected jobs data and positive consumer sentiment.

Positive Job Indicators

Last month, non-farm payrolls soared by 199,000, following a 150,000 increase in October, as per a Bureau of Labor Statistics report.

Concurrently, the unemployment rate tightened to 3.7%, marking a four-month low and surpassing all forecasts.

Consumer Sentiment Impact

Stock gains picked up speed when University of Michigan data showed a significant 22-year low in households’ future inflation expectations.

Market Response

This positive economic data had varying impacts across financial markets.

Treasury yields saw an uptick, attributed to the unexpected drop in the unemployment rate to 3.7%. This development suggests that a robust labor market might defer potential Federal Reserve rate cuts.

Swap markets adjusted their forecasts, expecting a 110-basis point cut for 2024, down from the prior estimate of 125 basis points. The probability of a March rate cut now stands at 40%, down from over 50%.

Market Performance

The S&P 500 witnessed its sixth consecutive week of gains, marking its most extended winning streak since November 2019.

For the week, the S&P gained 0.21%, while the Dow saw a marginal increase of 0.01% and the Nasdaq surge by 0.54%.

Here are the closing levels on Friday, December 8th, 2023: 

 Last  Change  Change%
DOW JONES  36,247.87 +130.49 +0.36%
S&P 500 4,604.37 +18.78 +0.41%
NASDAQ 14,403.97 +63.98 +0.45%
U.S. 10Y   4.226%
VIX 12.35 0. 0%

Investor Sentiment And Future Outlook 

Despite the rise in bond yields and potential postponement of rate cuts, investors remained optimistic.

Corporate America’s robustness in maintaining employment levels offers crucial support for buying, lowering the chance of an imminent recession.

The Federal Reserve’s management seems effective in shaping a ‘Goldilocks economy’—higher rates to curb inflation without harming the economy.

The Direction Ahead And Cautionary Notes  

As long as investors are focusing on rate cuts it is unlikely to see buyers backing off for now.

However, caution is advised at these elevated levels, given the consistent six-week upward trajectory of the S&P.

The recent movements in the bond market, signaling overbought levels, could potentially translate into similar behavior for stocks.

Investors should brace for upcoming inflation data releases and the Fed meeting.

Anticipate a hawkish tone from the Fed, aiming to avoid signaling early rate cuts. Additionally, expect volatile swings due to December’s liquidity patterns.

Source: CBOE, Bloomberg

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable U.S. bank exceeding 20 years.  

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