The week concluded with upward movements in the markets following the release of closely monitored job data that exceeded expectations slightly.
In November, U.S. employers added 199,000 jobs, a figure representing a deceleration from earlier in the year but surpassing economists' forecasts. The unemployment rate experienced a decline to 3.7%. The S&P 500 ended the day with a 0.4% increase, marking its sixth consecutive weekly gain. Similarly, the Nasdaq and Dow Jones Industrial Average also posted a 0.4% gain, with all three major indexes closing at their highest level for the year.
For traders, this employment data contributed to the prevailing optimism that the economy is smoothly heading toward a soft landing. Since the start of November, stocks have experienced a rally, and bond yields have declined as investors speculate that the Federal Reserve can rein in inflation without triggering a significant recession.
Ronald Temple, Chief Market Strategist at Lazard, expressed positivity about the report, interpreting it as a sign that the Federal Reserve is achieving a "Goldilocks scenario" of reducing inflation without pushing the economy into a recession.
Presently, traders are factoring in potential rate cuts by the central bank in the coming year, with the first one anticipated as early as March. According to the CME FedWatch Tool, there is approximately a 50% probability of a rate cut during the Fed's March meeting. Following the jobs report, Treasury yields increased, with the yield on the 10-year benchmark note rising from 4.129% to 4.244%.
Johan Grahn, Head of Exchange-Traded Fund Strategy at Allianz Investment Management, noted that with a softening labor market, the Federal Reserve can engage in discussions about a potential policy shift. However, Grahn cautioned that while the market is currently pricing in five rate cuts for the next year, the Federal Reserve would require more evidence of a "soft landing with staying power" before committing to such measures.
Adding to the optimistic atmosphere, a preliminary December reading of a University of Michigan survey indicated that Americans were more positive about the economy, and their expectations for inflation over the next 12 months declined.
In corporate news, Lululemon reported sales growth that exceeded Wall Street expectations, prompting a 5.4% surge in the athleisure retailer's shares to reach a record high. Coinbase Global, a cryptocurrency exchange, experienced a 7.7% increase in its shares to the highest level since April 2022, riding the upward trend of bitcoin over the past month.
Paramount Global emerged as the S&P 500's top performer, soaring 12% following reports from online entertainment news site Deadline that several investors were considering a takeover of the company.
Oil prices saw an increase, with the global crude benchmark, Brent, closing at approximately $75.84 per barrel.
Internationally, Japanese stocks declined, and government bonds experienced a sell-off for the second consecutive day as expectations of Japan's central bank ending its negative interest rate policy impacted the markets, leading to a 1.7% decrease in Japan's Nikkei 225. In contrast, the Stoxx Europe 600 rose by 0.7%, reaching a new 52-week high at the close.
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