The futures markets forecast a positive open to today’s stock trading. Early this morning, the U.S. Bureau of Labor Statistics (BLS) released important employment data for the month of November. Job additions tallied a solid 227,000, versus economists’ consensus estimate of 214,000 and the previous-month level of 36,000, revised up from 12,000. The November and October number comparisons were impacted by severe weather across the Southeast and temporary labor actions. Last month’s unemployment rate came in at 4.2%, matching expectations and a tick higher than the prior reading of 4.1%. Notwithstanding a recent increase in jobless claims, today’s report provides further evidence of a healthy jobs market, following an increase in total available positions.
Also prior to the opening bell, the BLS reported that hourly wages rose a strong 0.4%, relative to the outlook for 0.3% and in line with October’s gain. On a year-to-year basis, employee pay advanced 4.0%. The experts were looking for 3.9% growth and the month-before increase was also 4.0%. Momentum in compensation is firm, supporting healthy consumer spending. Notably, auto sales have stepped higher.
As this morning progresses, investors will receive updated news from the University of Michigan on consumer sentiment, which is expected to modestly strengthen, and will hear from several Federal Reserve officials on their views of the domestic economy and central bank policy.
Stock market indexes hit new records this week. The tech-heavy NASDAQ stepped above 19,700, while the broader Standard & Poor’s 500 (S&P 500) exceeded 6,000, and the blue-chip Dow Jones Industrial Average passed the 45,000 mark, albeit temporarily. Through Thursday’s close the NASDAQ was up a strong 2.5% this week and the S&P 500 had advanced 0.7%. The Dow gave up some ground yesterday, running about 0.3% short of last week’s close. Technology companies supported the indexes. Positive operating guidance from Salesforce (CRM), Marvell Tech (MRVL), Okta (OKTA), Pure Storage (PSTG), AT&T (T), and Tesla (TSLA) helped overall market momentum. More generally, investors did display some caution yesterday, while waiting for the new employment numbers.
Next week, in addition to important jobless claims results for the seven-day period ended December 7th, Wall Street will get the latest data on inflation, by way of the consumer price index and the producer price index. Other news on wholesale inventories, productivity, and import prices will stream in, as well. The Federal Reserve will weigh the new data prior to its mid-December meeting on setting short-term interest rates. We expect the Fed to cut the federal funds rate by 25 basis points, to a range of 4.25%-4.50%. The resiliency of the U.S. economy has prompted Chairman Jerome Powell and other Fed officials to express caution about the pace of rate cuts in 2025. Central bank officials are trying to determine the “neutral rate,” which would neither accelerate nor slow economic growth. Economists appear to be leaning toward a neutral rate in the high-3% area.
U.S. stocks have staged an impressive performance over the past two years. That suggests gains in 2025 will be more limited, given elevated price-earnings multiples. Several market watchers, however, note that share-price gains have extended beyond the technology giants to their smaller peers and other sectors. This supports the case for more advances, at least in early 2025. We advise investors to diversify their portfolios, while maintaining a core group of large-cap industry leaders. Attractively priced healthcare and industrial equities have gotten more attention, lately. – David M. Reimer
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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