Investors are hoping for interest rate cuts
US jobs data boosts Wall Street
December 8, 2023, 11:27 p.m
The new figures from the US labor market help the DAX to a new record high. But the report also creates a positive mood on Wall Street. Investors are now hoping for interest rate cuts soon.
Wall Street closed with slight gains following the eagerly awaited US jobs report. The indices initially reacted cautiously to the data and only increased over time. A slightly higher job increase than expected was reported for November. Investors initially had cautious concerns about whether the high expectations of interest rate cuts would continue to be true. Over the course of the week, the number of job vacancies and the ADP report on job growth in the US private sector indicated a slowdown in the job market.
However, the unemployment rate fell unexpectedly to 3.7 from 3.9 percent, while economists had forecast a stable value. Current data points to a labor market that is cooling enough to deter the Fed from further rate hikes, but still too strong to consider rate cuts in the near term, it said.
The Dow Jones Index gained 0.4 percent to 36,248 points. The S&P 500 also increased by 0.4 percent and closed at an annual high. Also for him Nasdaq Composite it went up by 0.4 percent. According to initial data, there were 1,628 (Thursday: 1,909) price winners and 1,221 (949) losers on the Nyse. 68 (92) shares closed unchanged.
Consumer inflation expectations declining
However, the labor market data leaves room for different interest rate forecasts. While total job creation came in higher than expected, supporting views that the economy remains strong, some analysts saw signs of a slowdown. The return of strikers in the automotive industry makes November’s increase of 199,000 seem less strong. “Excluding this one-off increase, the gain of 152,000 was about the same as the muted increase in October,” said Paul Ashworth of Capital Economics.
It is more than questionable whether the reported job growth of 199,000 is large enough to make the US Federal Reserve even think about raising interest rates again. 190,000 new jobs were expected. US Federal Reserve Chairman Jerome Powell recently said that thoughts of interest rate cuts were premature, but at the same time signaled that the time for interest rate hikes was probably over.
The mood of US consumers surprisingly brightened significantly in December. In addition, consumers’ inflation expectations over the next twelve months fell to 3.1 from 4.5 percent compared to the previous month.
Dollar gains – gold loses
The Oil prices increased significantly. The quotes from Brent and WTI increased by up to 2.7 percent. Saudi Arabia and Russia have called for further funding restrictions to be imposed in the coming months. However, today’s gains could not make up for the hefty weekly loss of around 5 percent. Prices have recently been weighed down by ongoing concerns about demand.
Yields on the bond market rose. The Return Ten-year shares gained 7.7 basis points to 4.23 percent. The unexpectedly high job growth caused expectations of an imminent interest rate cut by the Fed to diminish somewhat, it was said. The likelihood of an initial rate cut shifted from March to May, according to the data, according to the CME’s FedWatch tool.
The dollar gained. The Dollar index rose by 0.4 percent, making up for the previous day’s losses. This was supported by the prospect that the first interest rate cut by the US Federal Reserve could take even longer, it was said. The Gold price fell after the US jobs report. The troy ounce fell by 1.3 percent to $2,003. On a weekly basis there is a minus of 3.5 percent. Market participants particularly pointed to the rise in the dollar following the labor market data.
Chevron shares rise with oil prices
For the Broadcom stock it went up by 2.4 percent. The group wants to increase its sales significantly in the new financial year, thanks in part to the takeover of VMware. The chip company forecast sales of around $50 billion for 2023/24 after $35.8 billion in the previous year. In the fourth quarter, the US company made a higher profit than expected.
Lululemon Athletica gained 5.4 percent, although the sportswear retailer’s fourth-quarter forecast disappointed Wall Street. On the other hand, the company delivered good results for the third quarter, in which sales growth was 20 percent and profits were above estimates.
The Chevron stock rose 1.3 percent as oil prices rose, although the US Federal Trade Commission (FTC) approved the planned $53 billion takeover of competitor Hess Corp. examines what would be the second-largest merger in the oil industry this year.