U.S. stock index futures advanced Friday as monthly Labor Department data showed the pace of job creation cooled in December, fueling hopes that the Federal Reserve’s interest rate hikes are starting to have the desired effect.
How are stock futures trading
- S&P 500 futures ES00, +0.95% gained 40 points, or 1.1%, to 3,869.
- Dow Jones Industrial Average futures YM00, +0.99% gained 354 points, or 1.1%, to 33,424.
- Nasdaq 100 futures NQ00, +0.79% advanced 109 points, or 1%, to 10,929.
On Thursday, the Dow Jones Industrial Average DJIA, -1.02% fell 340 points, or 1.02%, to 32930, the S&P 500 SPX, -1.16% declined 45 points, or 1.16%, to 3808, and the Nasdaq Composite COMP, -2.45% dropped 154 points, or 1.47%, to 10305.
What’s driving markets
Stock-market bulls cheered Friday’s jobs report, which showed that the pace of job creation and wage growth cooled last month, contradicting labor-market data released earlier in the week.
The December nonfarm payrolls report showed 223,000 jobs were created in December, above expectations for 200,000 new jobs, though the pace of job creation slowed from 256,000 during November. Wages grew by just 0.3% in December, down from 0.4% a month earlier.
See: U.S. adds 223,000 jobs in December and jobless rate matches 55-year low of 3.5%
While stocks advanced in the wake of the data, it seems the labor market has continued to confound expectations for an imminent recession, market analysts said. While the pace of wage growth has slowed slightly, workers continued to command higher pay, even if wages have lagged headline inflation.
“This is not going to push the Fed off its agenda one iota,” said Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., in commentary about Friday’s data.
Numerous Fed officials have made clear that they want to see unemployment climb in order to help suppress inflation and engineer a return to the Fed’s 2% target. Senior Fed officials expect unemployment to rise by nearly a percentage point in 2023, according to projections released in December.
As a result, Friday’s data likely won’t change the outlook for stocks in the near term, analysts said.
“This report should add to investor confusion and heighten market volatility in the weeks ahead,” said John Lynch, chief investment officer for Comerica Wealth Management. “It also complicates the Fed’s battle against inflation, though the minutes from the December monetary policy meeting reiterate the committee’s resolve. A 50-basis point move is back on the table for the next FOMC meeting in a few weeks.”
“Equities should remain volatile in the first half of 2023 until investors get comfortable with a trough in GDP and EPS, along with a peak in rates. As markets begin to price in recovery by midyear, we look for 5.0% EPS gains in 2024 to result in fair value of 4,150 for the S&P 500 Index by yearend,” he added.
The S&P 500 index is down more than 19% from its 52-week high after the Fed raised interest rates by 4.25 percentage points in 2022 in an attempt to crush inflation that hit a four-decade high of 9.1% in June, according to the consumer-price index.
Jobs data released earlier in the week painted a picture of a labor market that had remained robust despite the Fed’s best efforts, and it’s not clear whether Friday’s data have meaningfully changed this perception, market strategists said.
JOLTS data released Tuesday showed more than 10 million jobs remained open. Analysts noted that the ADP private sector employment report released on Thursday was stronger than expected, which triggered a selloff in stocks.
Other economic data set for release in the U.S. on Friday include the ISM services sector index for December and factory orders for November, due at 10 a.m. A number of Fed speakers are expected, including Atlanta Fed President Raphael Bostic and Fed Gov Lisa Cook at 11:15 a.m.; Richmond Fed President Tom Barkin at 12:15 p.m.; and Kansas City Fed President Esther George at 1 p.m.
Single-stock movers
- Technology stocks may be under pressure on Friday after Samsung Electronics KR:005930 said quarterly profits fell to an eight year low as it saw weaker demand for chips and smartphones.
- Southwest Airlines Co. shares are worth watching after the airline warned Friday that it expects to report a surprise net loss for the fourth quarter after cancelling thousands of flights over the holidays.
- Tesla Inc. shares are sinking lower after the electric vehicle maker cut prices in China again.
