Week 48 in Brief
Stocks in the US dipped on Friday, cutting off some of the gains made earlier in the week but all the major indices ended in weekly gains. Labour data released on Friday morning came in better than expected, raising Wall Street worries about the Fed’s reaction to the results.
Payrolls rose by 263,000 in November, a bigger gain than the 200,000 increase expected by economists. Average hourly earnings also came in above expectations, jumping 0.6% compared with the prior month and 5.1% against the same month a year ago. The unemployment rate held steady at 3.7%. However, remarks on Wednesday from Fed Chair Jerome Powell appeared to confirm slowing rate hikes starting as early as December.
How did the major indices perform? On Friday:
- The Dow Jones Industrial Average closed up just 34.87 points, or 0.1%, to 34,429.88 points.
- The S&P 500 dipped 0.1% to 4,071.70, rebounding from an earlier loss of 1.2%.
- The Nasdaq Composite recovered losses in earlier trading to end nearly 0.2% lower at 11,461.50 points.
For the week:
- Nasdaq posted the largest increase at nearly 2.1%.
- The S&P 500 added 1.1%,
- The Dow ticked up by 0.2%.
What drove the U.S. market?
- The Labor Department’s jobs report showed nonfarm payrolls rose by 263,000, compared with an estimated 200,000, as U.S. employers hired more workers than expected in November and raised wages despite mounting worries of a recession.
- The U.S. unemployment rate remained unchanged, as expected.
- Slowing order growth was one factor prompting RBC Capital Markets to downgrade DoorDash. The firm slashed its rating to a sector-perform from outperform, while lowering the stock’s price target to $60 from $70. The new target price represents roughly a 5% upside.
- Information technology shares bore the brunt of selling pressure among the 11 S&P 500 sector indexes and were down 1.2%.
- Growth and technology companies such as Apple Inc and Nvidia Corp fell 1.2% and 2.7%, respectively.
- Ford Motor Co slipped 1.3% on lower vehicle sales in November, while DoorDash Inc lost 2.5% after RBC downgraded the food delivery firm’s stock.
- Declining issues outnumbered advancers for a 1.37-to-1 ratio on the NYSE and a 1.06-to-1 ratio on the Nasdaq.
How did the European markets perform?
- European shares fell back on Friday after two days of strong gains that helped the STOXX 600 index notch up its seventh straight week of rises amid signs of China re-opening its economy and easing worries about interest-rate hikes.
- The pan-European index STOXX 600 closed 0.2% lower after rallying 1.5% in the last two sessions. The index gained 0.6% over the week and registered its longest weekly winning streak since April 2021.
- Energy and technology stocks were among the biggest drags on the broader index, offsetting gains in real estate and retailers.
- Rate-sensitive technology stocks also took a hit as euro zone government bond yields rose in line with a move in U.S. Treasury yields after data showed U.S. employers hired more workers than expected in November and increased wages despite mounting worries of a recession.
- Among individual stocks, French drugmaker Sanofi fell 1.9% after saying that, if the company bid for biotech company Horizon Therapeutics Plc, it would do so in cash.
- Horizon, with a market capitalization of about $18 billion, is also in talks with Amgen Inc and Johnson & Johnson unit Janssen Global Services over potential takeover offers.
- Credit Suisse jumped 9.3% after 12 straight days of losses that sent the stock to a record low. The Swiss lender is looking to speed up cost-cutting as the revenue outlook worsens.
How did Asian markets perform?
- Most Asian stock markets retreated in cautious trade on Friday ahead of key U.S. payrolls data that is expected to factor into monetary policy, although a report that China plans to further scale back its strict anti-COVID measures helped limit losses.
- China’s blue-chip Shanghai Shenzhen CSI 300 index fell 0.5%, while the Shanghai Composite fell 0.3%. Both indexes were set to rise 3.6% and 1.7% for the week respectively, amid growing speculation that China will lift its strict zero-COVID policy.
- Hong Kong’s Hang Seng index fell 0.7% on Friday and was set to gain 2.6% this week.
- South Korea’s KOSPI index was set to add 0.3% this week, while the Taiwan Weighted index was trading up 1.4% for the week.
- India’s Nifty 50 and BSE Sensex 30 bourses retreated from record highs on Friday. But the two were set to close the week 1% higher on increasing optimism over the Indian economy.
- Japanese stocks were a major outlier this week, with the Nikkei 225 index sinking 1.7% on Friday and losing nearly 2% this week.
Bonds and Commodities
- In Treasuries, US yields turned lower after earlier rising sharply as investors eyed the resilient labor market and rising wages as worrisome for the Fed’s efforts to tame inflation.
- Benchmark 10-year note yields were up 2.7 basis points to 3.554%, from 3.527% late on Thursday. The 30-year bond yield was last down 3.9 basis points at 3.594%, from 3.633%. The 2-year note yield last was up 7.1 basis points at 4.3255% from 4.254%.
- European government bond yields rose after Friday data showed U.S. employers hired more workers than expected in November and raised wages, complicating the Federal Reserve’s intention to start slowing the pace of its interest rate hikes this month.
- Germany’s 10-year bund yield, the benchmark for the eurozone, rose as much as 5 basis points on the day to 1.872%, having earlier traded down as low as 1.76%, its lowest since Sept 19.
- Oil futures sank in Friday’s choppy session ahead of a meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday and an EU ban on Russian crude on Monday.
- U.S. crude settled down 1.5% at $79.98 per barrel and Brent ended at $85.57, also down 1.5% on the day.
- Gold prices also regained some lost ground from their earlier reaction to the jobs data.
- Spot gold dropped 0.3% to $1,797.69 an ounce after earlier falling as much as 1.4%.
- The dollar gradually gave back its gains towards the close of trading. Earlier it had jumped sharply in response to the jobs data, gaining as much as 0.82%.
- Recently, the dollar index, which measures the greenback against a basket of major currencies, was down 0.143%, with the euro up 0.14% to $1.0537.
- The Japanese yen strengthened 0.77% versus the greenback at 134.27 per dollar, while the Sterling was last trading at $1.2279, up 0.21% on the day.
Next week, Purchasing Managers’ Index (PMI) surveys from S&P Global and the Institute for Supply Management (ISM) will provide insights into U.S. manufacturing and service sector performance.
On Friday, the Bureau of Labor Statistics (BLS) will release its Producer Price Index (PPI) reading for November, tracking inflation from the standpoint of goods-producing businesses and wholesalers. Also on Friday, the University of Michigan will release the preliminary December reading of its Consumer Sentiment Index (MCSI), providing a timely update on consumer confidence.
Companies reporting earnings next week will include Costco, Broadcom, Oracle, AutoZone, Gamestop, and Lululemon Athletica, among others.