US Markets Surge Amid Mixed Payroll Data and Record Highs

Stock Indices See Gains with the S&P 500 and Nasdaq Reaching New Heights

The S&P 500 Index ($SPX) (SPY) is up +0.34%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.67%. Today, stocks are rising, driven by the S&P 500 and Nasdaq 100 hitting new record highs. A mixed US payroll report from November fueled optimism, increasing expectations for a Federal Reserve interest rate cut later this month from 70% to 87%. While November’s nonfarm payrolls exceeded expectations, the unemployment rate rose unexpectedly. This mixed economic data helped to lower Treasury yields, with the 10-year T-note yield falling to its lowest level in a month. Positive sentiment continued after the University of Michigan’s consumer sentiment index for December climbed to an eight-month high.

Energy Sector Takes a Hit as Crude Oil Prices Decline

In contrast, energy stocks are struggling, with WTI crude oil prices dropping over -1% to reach a two-and-a-half week low. Health insurance and managed healthcare stocks are also facing pressure today.

Strong Recruitment Data but Rising Unemployment Rate

US November nonfarm payrolls increased by +227,000, exceeding expectations of +220,000. The October figures were also revised upward to +36,000 from the earlier reported +12,000. However, the unemployment rate unexpectedly rose to 4.2%, indicating a weaker labor market than anticipated.

Additionally, average hourly earnings for November increased by +0.4% month-over-month and +4.0% year-over-year, outperforming expected gains of +0.3% and +3.9%, respectively.

The University of Michigan’s consumer sentiment index for December jumped +2.2 to reach 74.0, surpassing estimates of 73.2.

Fed’s Cautious Stance Concerns Investors

Comments from Fed Governor Bowman added to market hesitations, stating, “I would prefer that we proceed cautiously and gradually in lowering the policy rate as inflation remains elevated.”

Rate Cut Speculations as Next FOMC Meeting Approaches

The markets are currently pricing in an 87% probability of a -25 basis points rate cut during the upcoming FOMC meeting on December 17-18.

Global Market Overview

International markets displayed mixed results today. The Euro Stoxx 50 rose by +0.50%, climbing to a five-week high. China’s Shanghai Composite Index also gained, closing up +1.05% at a three-week high. However, Japan’s Nikkei Stock 225 fell -0.77%.

Interest Rates and T-Note Performance

March 10-year T-notes (ZNH25) improved by +5 ticks, with the yield decreasing -4.8 basis points to 4.128%. Prices for T-notes reached a one-and-a-half month high today, despite the mixed payroll report. The unexpected increase in the unemployment rate raised the likelihood of a rate cut, contributing to T-note gains.

However, the significant increase in average hourly earnings and the rise in consumer sentiment presented hawkish concerns for Fed policy. Furthermore, Fed Governor Bowman’s remarks regarding cautious rate cuts further weighed on T-note sentiment.

European Bond Yields Decline

European government bond yields also dropped today. The 10-year German bund yield fell from a one-week high of 2.130% to 2.110%, while the 10-year UK gilt yield decreased by -0.3 basis points to 4.278%.

Germany’s Industrial Production Disappoints

In Germany, industrial production in October unexpectedly fell by -1.0% month-over-month, contrary to positive projections of +1.0%.

Swaps indicate a full 100% chance of a -25 basis point rate cut by the ECB at its upcoming December 12 policy meeting, with a 9% chance of a larger -50 basis point cut.

Top Movers in the US Market

Lululemon Athletica (LULU) led the gainers in the S&P 500 and Nasdaq 100, surging over +16% after posting Q3 net revenue of $2.40 billion, exceeding expectations of $2.36 billion. The company also raised its 2025 net revenue estimate to a range of $10.45 billion to $10.49 billion, bettering the consensus estimate of $10.42 billion.

Hewlett Packard Enterprise (HPE) saw an increase of more than +10%, fueled by Q4 net revenue of $8.46 billion, above the consensus of $8.26 billion.

Ulta Beauty (ULTA) rose by over +8% following its Q3 EPS of $5.14, significantly outperforming the consensus of $4.54, and increasing its full-year EPS forecast to $23.20-$23.75.

DocuSign (DOCU) achieved over +23% gain, reporting Q3 subscription revenue of $734.7 million, surpassing the consensus of $724.5 million and raising its 2025 revenue projection.

Veeva Systems (VEEV) is up more than +10% after reporting adjusted EPS of $1.75, above the consensus of $1.58, and revising its 2025 forecast upwards.

Epam Systems (EPAM) and Accenture Plc (ACN) both experienced upticks of over +4% and +3%, respectively, following upgrades from Goldman Sachs.

Additionally, Molson Coors Beverage (TAP) gained over +1% after Needham & Co rated it as a buy, setting a new price target of $72.

Notable Declines in the Market

Leading the decliners in the S&P 500 is Cooper Cos (COO), which fell over -4% after reporting Q4 net sales of $1.02 billion, slightly below consensus forecasts. The stock also provided cautious revenue projections for 2025.

Energy stocks are under pressure as WTI crude prices decline. Diamondback Energy (FANG) fell over -2%, with other companies like ConocoPhillips (COP) and Chevron (CVX) also underperforming.

UnitedHealth Group (UNH) led losses in the Dow Jones Industrials, sliding over -3%, with other health-related stocks also showing declines.

Samsara (IOT) is down more than -4% after providing lower-than-expected Q4 revenue guidance, while Smith & Wesson Brands (SWBI) plummeted over -19% after missing earnings estimates.

UiPath (PATH) experienced a decline of over -2% despite raising its revenue guidance, as analysts noted it could take time for benefits to materialize. Paccar Inc (PCAR) also dropped over -1% following a downgrade from Jeffries.

Upcoming Earnings Reports

On December 6, 2024, earnings reports are expected from Avid Bioservices Inc (CDMO), Duckhorn Portfolio Inc/The (NAPA), Genesco Inc (GCO), Lovesac Co/The (LOVE), National Beverage Corp (FIZZ), PACS Group Inc (PACS), and RH (RH).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.