4.05pm: Positive sentiment after hot jobs report
At Friday's close, US stocks were firmly in the green, with the S&P 500 closing 2.8% higher at 3,895, the Nasdaq up 2.6% at 10.569 and the Dow rounding out the pack with a gain of 2.1% to close at 33,631 points.
Investors "appear to be in the mood for seeing the best in any situation," IG's Chris Beauchamp wrote.
"Payrolls growth this month may have exceeded forecasts, but still represents a slowdown from last month’s figure, while the ISM non-manufacturing PMI’s reversal into contraction for the first time since 2020. That stocks have risen this afternoon might seem odd, but the general takeaway is weaker data will help to slow down the Fed earlier than expected, or perhaps bring forward the first cut in US rates. US indices have rallied but have yet to break above recent resistance, suggesting this bounce has yet to really develop the necessary strength for a real rally.”
12:01pm: Traders cautiously optimistic that jobs data could soften Fed
At midday, the Dow was up 615 points, 1.9%, to 33,546, the Nasdaq Composite added 189 points, 1.8%, to 10,492 and the S&P 500 improved 71 points, 1.9%, to 3,879.
Investors reacted to the latest jobs figures, which saw total nonfarm payroll employment increase by 223,000 in December, down from 263,000 in November but ahead of the consensus analyst expectation of 200,000. The unemployment rate came in at 3.5%, below the expected 3.7%.
“Investors appear to be in the mood for seeing the best in any situation," said Chris Beauchamp, chief market analyst at online trading platform IG. "Payrolls growth this month may have exceeded forecasts, but still represents a slowdown from last month’s figure, while the ISM non-manufacturing PMI’s reversal into contraction for the first time since 2020 ... "the general takeaway is weaker data will help to slow down the Fed earlier than expected, or perhaps bring forward the first cut in US rates."
9.45am: Investors weigh up jobs report
US stocks kicked off the day’s trading session in the green as the release of a stronger-than-expected jobs report has prompted speculation over the Fed’s future path of interest rate hikes.
Shortly after the market opened, the Dow Jones Industrial Average had added 409 points or 1.2% at 33,339 points, the S&P 500 was up 43 points or 1.1% at 3,851 points, and the Nasdaq Composite had gained 79 points or 0.8% at 10,384 points.
ING chief international economist James Knightley noted that the jobs report was a fairly mixed bag with payrolls broadly in line with expectations, the unemployment rate indicating strength, but wages indicating softening inflationary pressures.
“Consequently, the focus switches to next Thursday's CPI report,” he said.
“Markets are currently split between whether the Fed will raise rates by 25bp or 50bp at the February Federal Open Market Committee meeting. Given the softer wage situation, if we get another softish core CPI print, 0.3% month-over-month or below, the case for a 25bp hike at the February FOMC versus 50bp is likely to build.”
Meanwhile, Tesla Inc shares fell 7.2% at the open on the news it has once again slashed the prices of its Model Y and Model 3 vehicles in China, among price cuts in other markets including South Korea, Japan and Australia.
Forex.com market analyst Joshua Warner said this has sparked further concerns that Tesla is having to make discounts to try and reinvigorate waning demand and in response to intense competition from Chinese rivals.
“Importantly, the latest cut means the Model Y in China is now priced 43% below what is on offer to American customers while the Model 3 is now 30% cheaper,” Warner said.
On the other hand, Costco Wholesale Corporation shares soared 5.4% following the release of its December sales figure yesterday which showed the retailer saw increased business during the holiday period.
8.55am: Another strong jobs report
The US labor market remains strong despite inflationary pressures with two key employment reports released this week indicating that the Fed may need to stick with its path of aggressive interest rate hikes to tame inflation.
The American economy added more jobs than expected in December according to the latest total nonfarm payroll employment report released on Friday, which comes after ADP private payrolls data also topped expectations yesterday.
Total nonfarm payroll employment increased by 223,000 in December, down from 263,000 in November but ahead of the consensus analyst expectation of 200,000.
Notable gains occurred in leisure and hospitality, health care, construction, and social assistance, the US Bureau of Labor Statistics said.
The unemployment rate came in at 3.5%, below the expected 3.7%.
ADSS global head of strategy and trading services Srijan Katyal commented: “This is another sizeable increase that shows that the US jobs market is giving no meaningful signs of slowing down, with nine consecutive reports beating estimates.”
Katyal added that another increase of this size is positive for workers as it supports salary growth, but noted that it will further buoy the high inflation that the Fed has been fighting with record interest rate hikes.
“With the Fed highlighting a focus on retaining flexibility for future rate changes, they will be looking at this data closely," Katyal said.
"This job growth will likely be too high for the Fed, which could lead to further rate increases of a substantial size.”
Titan Asset Management chief investment officer John Leiper said that the data, coming in above expectations with a notable drop in the unemployment rate pointing to ongoing labor market tightness, would do little to deter the Fed from its current hawkish stance.
“Good news is bad news as it increases the propensity of the central bank to continue hiking rates and to keep them there for longer,” he said. “We remain defensively positioned across risk assets.”
The market reacted positively to the news, with futures for Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all up 0.9% in pre-market trading.
6.30am: Good news may be bad for the market
Wall Street is expected to start mixed as the first trading week of 2023 draws to a close, with traders sitting on the fence ahead of a key employment report due for release before the market opens.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.2% in Friday pre-market trading, while those for the broader S&P 500 index gained 0.1% and contracts for the Nasdaq-100 shed 0.1%.
Ahead of the much-watched non-farm payrolls data, a stronger-than-expected ADP jobs report and weaker weekly jobless claims numbers weighed on equity markets yesterday, with both signaling that the employment market remains robust.
At the close the DJIA was down 1% at 32,930, the S&P 500 fell 1.2% to 3,808 and the Nasdaq Composite dipped 1.5% to 10,305.
A lack of progress on Capital Hill as House Republican leader Kevin McCarthy suffered defeat in the 11th round of voting to elect a speaker for the House of Representatives contributed to the negative sentiment, said James Hughes, chief market analyst at Scope Markets.
“Attention will now be very much on today’s non-farm payrolls and accompanying employment data, most notably wage growth readings,” Hughes added. “Assuming these continue to lag inflation, it’s going to add to concerns that the Federal Reserve will struggle to ensure the US economy avoids sliding into recession.”
Analysts expect the US economy to have added 200,000 jobs in December, down from 263,000 in November, with unemployment likely to remain at a 50-year low of 3.7%.
“The ADP private employment report this week topped estimates in December, potentially paving the way for a better-than-expected jobs report later today,” commented Victoria Scholar, head of investment at interactive investor.
“It is a case of good news is bad news for the markets in the sense that any signs of strength in the labor market could bolster inflation expectations, prompting the need for a more hawkish policy response from the US Federal Reserve.”