Scott Olson
Major market averages trade in a relatively muted fashion on Friday after Wall Street received a hawkish jobs report.
Market Averages and Performance
The S&P 500 (SP500) was +0.1%, while the Nasdaq Composite (COMP.IND) was +0.2%, and the Dow (DJI) was -0.1%.
Stocks are looking at a lower week to start the year. Going into Friday, the S&P 500 (SP500) is down 1.7% for the last three sessions, with the Dow (DJI) off 0.7% and the Nasdaq (COMP.IND) down 3.3%. Info Tech (XLK) is down more than 4% for the week as growth struggled in the face of rising yields.
Jobs Report Impact
The latest jobs figures hit. U.S. nonfarm payrolls rose by 216K in December, exceeding the +170K expected figure and accelerating from the 173K increase in November, which was revised from the original +199K estimate.
At the same time unemployment was unchanged at 3.7% compared with the 3.8% consensus.
Expert Opinions on Jobs Report
“The US Unemployment Rate has now been below 4% for 23 straight months, the longest streak since the late 1960s,” Charlie Bilello, Chief Market Strategist at Creative Planning noted.
“Overall, another solid jobs report. But below the surface it’s not as strong as headline suggests. Three-mo avg increase in jobs is 165K. That’s solid but not as strong as 216K Dec headline suggests,” Kathy Jones, Chief Fixed Income Strategist at Charles Schwab said.
Interest Rate Movement
Rates were lower. The 10-year Treasury yield (US10Y) gained 1 basis point to 4.01%. The 2-year yield (US2Y) dipped 4 basis points to 4.34%.
“Market rates continue to drift higher, and we feel that this process can continue in the weeks ahead,” ING said. “Markets are just not yet seeing enough from the macro data to validate the dramatic fall in market rates seen at the tail end of 2023. The key areas to watch are inflation data in the eurozone and labor market data in the US.”
Economic Calendar Data
“The re-evolution of a negative 10yr term premium adds another twist, as long tenor rates have on that measure overshot to the downside in the past month or so,” ING added. “We still expect to see 3.5% on the 10yr as a call in 2024, but we fear a pull-back theme first. The 4% level is key. If the 10yr gets comfortable above that post payrolls, it could do some testing higher for a bit. At least until something really breaks.”
Also on the economic calendar the December ISM Services PMI fell to 50.6, versus the 52.6 consensus number.
