Closing Stock Market Summary
The major indices closed today's session near their highs of the day. The S&P 500 (+0.4%) closed above the 4,600 for the first time since March 2022. The Dow Jones Industrial Average, Nasdaq Composite, and Russell 2000 registered gains of 0.4%, 0.5%, and 0.7%, respectively.
Only four of the S&P 500 sectors registered a decline while the energy sector (+1.1%) registered the largest gain as oil prices jumped 2.7% to $71.18/bbl. The consumer staples sector was the "worst" performer with a 0.7% decline.
The price action was more mixed in the early going, though, as the market digested this morning's economic data. The November Employment Situation Report featured a 199,000 increase in nonfarm payrolls, a larger than expected 0.4% increase in average hourly earnings, and a drop in the unemployment rate to 3.7% from 3.9%, which made for a solid report.
The preliminary University of Michigan Index of Consumer Sentiment for December climbed to 69.4 from the final reading of 61.3 for November. The spike in sentiment was aided by a large drop in year-ahead inflation expectations (to 3.1% from 4.5%) and five-year inflation expectations (to 2.8% from 3.2%).
Stocks did not have an outsized reaction to the aforementioned reports due in part to a growing sense that the market is due for consolidation. Another factor that kept buyer enthusiasm in check was the implication that strong data won't put the Fed in a rate-cut frame of mind.
As a result, the fed funds futures market is no longer pricing in a cut in March, but it still sees a strong likelihood of a cut in May (78.5% vs. 89.0% yesterday), according to the CME FedWatch Tool.
The 2-yr note yield climbed 17 basis points today, and 18 basis points this week, to 4.74%. The 10-yr note yield rose 12 basis points today, and two basis points this week, to 4.25%.
- Nasdaq Composite: +37.6%
- S&P 500: +19.9%
- Dow Jones industrial Average: +9.4%
- S&P Midcap 400: +8.3%
- Russell 2000: +6.8%
Reviewing today's economic data:
- Nonfarm payrolls increased by 199,000 in November ( consensus 175,000) after an increase of 150,000 in October.
- Nonfarm private payrolls increased by 150,000 in November ( consensus 155,000) after a revised increase of 85,000 in October (from 99,000).
- Average hourly earnings increased by 0.4% in November ( consensus 0.2%) following a 0.2% increase in October.
- The average workweek rose to 34.4 hours in November ( consensus 34.3) from 34.3 hours in October.
- The unemployment rate fell to 3.7% in November ( consensus 3.9%) from 3.9% in October.
- The key takeaway from the report is the recognition that the unemployment rate dropped as the participation rate increased, which suggests hiring activity in November was -- word of the day -- solid. In fact, the number of employed civilians increased by 747,000 while the number of unemployed civilians decreased by 215,000.
- The preliminary reading for the University of Michigan Consumer Sentiment Index for December came in at 69.4 ( consensus 62.6) versus the final reading of 61.3 in November. In the same period a year ago, the index stood at 59.8. Prior to this report, consumer sentiment had declined for four straight months.
- The key takeaway from the report is the linkage between the increase in sentiment and the decrease in inflation expectations. The latter set the tone for improved attitudes across age, income, education, geography, and political identification.
Looking ahead, there is no U.S. economic data of note on Monday, but Tuesday's calendar features the November Consumer Price Index.