Stocks Drop On Better -Than-Anticipated November Jobs Report
2:27 pm Friday, December 02nd, 2022
The stock market started the day on a downbeat note despite a relatively good November employment report, which featured stronger-than-expected nonfarm payrolls growth (263,000), higher-than-expected average hourly earnings growth (0.6%), and an in-line unemployment rate of 3.7% that held steady near a 50-year low.
The hang-up for the stock and bond markets is that this good news seems likely to defer any eventual pivot by the Fed with its monetary policy, suggesting the target range for the fed funds rate will go higher yet and remain higher for longer, as Fed Chair Powell and other officials have suggested will be the case.
Accordingly, the enthusiasm for Fed Chair Powell’s speech on Wednesday has been reined in some today, as market participants are seeing that now as a bit of an overreaction.
Things have improved noticeably, however, from opening levels in both the stock and bond markets. The S&P 500 was able to reclaim a position above its 200-day moving average at 4,046 and Treasury yields are pulling back from session highs. The 2-yr note yield, which hit 4.38% earlier, sits at 4.33% now. The 10-yr note yield, which hit 3.60% earlier, sits at 3.56% now.
As the initial selling dissipated somewhat, a few S&P 500 sectors pushed into positive territory. Materials (+0.7%) and industrials (+0.3%) lead the outperformers while financials (-0.8%) and information technology (-1.4%) bring up the rear.
The information technology sector is partially weighed down by lagging semiconductor components. The PHLX Semiconductor Index trails the broader market by a sizable margin, down 2.5%.
November nonfarm payrolls rose by 263,000 (consensus 200,000) following a revised 284,000 increase in October (from 261,000). Nonfarm private payrolls increased by 221,000 (consensus 200,000) following a revised 248,000 increase in October (from 233,000).
