As we approached the last session of the holiday shortened week, stock futures were pointing toward a negative start at the opening bell. In overnight trading, markets in Asia closed mixed, and the major European exchanges were all in the red. Elsewhere, oil prices have moved higher, with West Texas Intermediate up about 1.0%, to around $72.90 a barrel.
Earlier this morning, the Bureau of Labor Statistics released its figures for U.S. nonfarm payrolls for December. The report showed that 216,000 positions were added last month, compared to a downwardly revised 173,000 additions in November (previously 199,000), and above the consensus expectation of 170,000. It also showed that average hourly earnings increased 0.4% on a month-to-month basis and 4.1% year over year. This compared to increases of 0.4% and 4.0%, respectively, for November. Expectations called for increases of 0.3% and 3.9%. Additionally, the unemployment rate was unchanged at 3.7%. Wall Street was looking for a reading of 3.8%.
The hotter-than-expected numbers shook investor confidence that the Federal Reserve could soon begin lowering its overnight lending rate. This caused a sharp turnaround in stock futures, which were indicating a favorable start before the jobs report. The release of the minutes from its December meeting indicated some uncertainty over how soon, and how much, to cut the central bank’s target rate. Although the minutes indicated a need to “remain at a restrictive stance for some time”, Wall Street expects an easing of monetary policy sooner rather than later, with the Fed Funds Futures suggesting a 60% chance of a quarter-point cut as early as March.
Later today, the U.S. Census Bureau will release its report on factory orders for November. Consensus is calling for a 2.1% increase, compared to the 3.5% decline booked in October. We’ll also hear from the Institute for Supply Management, which is due to release its Non-Manufacturing (i.e. services) Purchasing Managers Index (PMI) for December. The index is widely expected to come in relatively unchanged at around 52.6%, versus 52.7% in November. (Percentages above 50 indicate expansion, while those below 50 indicate contraction.) Should that report come in on the mark, it would be the 12th consecutive month of increased activity in the sector.
Summing up Thursday’s market moves, the Dow Jones Industrials, after being up more than 285 points at one point in the session, managed to hang on enough to eke out a gain of 10 points, or less than a tenth of a percentage point. Meanwhile, the S&P 500 closed down 16 points, or 0.3%, while the tech-heavy NASDAQ lost 81 points (0.6%). – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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