© Reuters. FILE PHOTO – Traders are seen working on the New York Stock Exchange’s floor in New York City (USA), November 21st, 2022. REUTERS/Brendan McDermid
By Chuck Mikolajczak
NEW YORK (Reuters – Friday’s close was slightly lower, but major indexes recovered from their worst levels of the day. The November payrolls report fueled hopes that the Federal Reserve will continue its policy of increasing interest rates to combat inflation.
The Labor Department’s jobs report revealed that nonfarm payrolls rose 263,000 more than was expected. Wage growth was even faster than anticipated at 200,000.
As expected, the U.S. unemployment rate was 3.7%.
Brian Jacobsen (senior investment strategist, Allspring Global Investment, Menomonee Falls) stated that wage growth has been on the rise since August.
“We have to see the trend reverse in order for Fed to be comfortable with a temporary pause.” Until then, they’ll continue to taper towards a pause.”
Investors are looking for signs that the labor market is weakening, particularly wages, to predict a faster cooling of inflation, which will allow the Fed to reduce and eventually stop its rate hike cycle.
Stocks rose earlier in the week following comments by Fed Chair Jerome Powell about reducing interest rate hikes starting December.
The rose 34.87 points, or 0.1%, to 34,429.88, the S&P 500 lost 4.87 points, or 0.12%, to 4,071.7 and the dropped 20.95 points, or 0.18%, to 11,461.50.
However, equity ended the session at their lowest level of the day. Each major index fell at least 1% and the Dow managed a slight gain.
“I am actually encouraged by the way the market is regaining its lost ground from where it was today.” It’s another indication that the market wants at least a seasonal December rally,” stated Sam Stovall of CFRA New York, chief investment strategist.
“The market is starting to look across the valley, and say, “OK, in a year, the Fed will likely remain on hold and consider cutting rates.”
The Federal Open Market Committee, which sets the rates for inflation, meets Dec. 13-14. It is the final meeting in volatile years that saw the central banking attempt to contain the fastest rate of inflation ever recorded.
The major averages notched a second straight week of gains, with the S&P 500 climbing 1.13%, the Dow gaining 0.24% and the Nasdaq rising 2.1%.
Concerns over rising rates were a major factor in the declines of technology and growth companies like Apple Inc (NASDAQ) and Amazon (NASDAQ), which fell 0.34% and 1.43% respectively. However, these pressures were eased as U.S. Treasury yields declined throughout the day from earlier highs. The S&P 500 growth index declined 0.29% while technology shares were among the worst performing among the 11 major S&P 500 sectors with a fall of 0.55%.
Ford Motor (NYSE) Co fell 1.56% due to lower November vehicle sales, while DoorDash Inc lost 3.38% after RBC downgraded its stock.
The NYSE had 1.15 times more advancing issues than declining ones, while Nasdaq had 1.35 times as many advancers.
The S&P 500 posted 20 new 52-week highs and no new lows; the Nasdaq Composite recorded 86 new highs and 92 new lows.