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Stock Futures Jump on December Jobs Report -- WSJ

The Wall Street Journal · 01/06/2023 08:49

By Caitlin McCabe and Alexander Osipovich

U.S. stock futures rose after new labor-market data showed hiring last month was stronger than expected.

Futures tied to the S&P 500 and Dow Jones Industrial Average were both up about 0.5% on Friday morning. Contracts tied to the Nasdaq-100 gained 0.3%.

The Labor Department's report showed that employers added 223,000 jobs in December, more than the 200,000 expected by economists. That was less than the 263,000 jobs added in November -- but still higher than the 2019 pre-pandemic average.

Investors have entered the 2023 trading year on edge about the path ahead for interest rates, and Friday's jobs data will likely factor heavily into the Federal Reserve's next policy decision at its Jan. 31-Feb. 1 meeting.

In recent weeks, money managers had grown hopeful that inflation will slow quickly in the months ahead, possibly prompting the Fed to begin cutting rates later this year. But this week has reminded investors the path forward could be more complicated.

Minutes from the Fed's last policy meeting, released Wednesday, showed that officials expect to keep raising interest rates in case price pressures prove more persistent. Meanwhile, data earlier this week on job openings and jobless claims added to evidence that the U.S. labor market remains strong.

"The market is already pricing cuts in 2023, which we think is misplaced, " said Hani Redha, global multi-asset portfolio manager at PineBridge Investments, of interest rates. He noted that while data indicates that parts of the U.S. economy are clearly slowing, "there's no imminent sign of things falling off a cliff."

Mr. Redha said he will also be carefully watching corporate results during the fourth-quarter earnings season, which kicks off in earnest next week. "For us, the key is to be watching profitability and the reaction to that, and what companies do with their labor force," he said.

Major U.S. indexes are on pace to end their first week of 2023 with losses, extending 2022's selloff into the new year. In trading Tuesday through Thursday, the S&P 500 has lost 0.8% this week.

Some of 2022's major market trends are carrying into the new year. Shares of growth and technology companies have continued to decline -- Tesla and Microsoft, for example, have lost 10% and 7.3%, respectively, for the week through Thursday. News of a sharp drop in monthly deliveries in China helped keep Tesla shares under pressure Friday, with the stock declining more than 6% ahead of the opening bell.

Conversely, cyclical stocks, including those of airlines, banks and homebuilders, have climbed this week.

The dollar has strengthened, reviving a trend seen through most of 2022. On Friday, the WSJ Dollar Index added 0.4%.

Yields on short-term Treasury bonds have also climbed this week. The yield on the two-year note -- which reflects near-term interest-rate expectations -- rose on Friday to 4.448%, its highest level since November. The yield on the benchmark 10-year Treasury note rose to 3.731%, from 3.720% Thursday.

Overseas, the pan-continental Stoxx Europe 600 added 0.2%, and was on pace to finish the week with gains. Fresh data Friday showed that headline annual inflation in the eurozone eased by more than expected in December, though there was an increase in so-called core inflation, which strips out volatile energy and food prices.

In Asia, trading was mixed for the day -- and the week. Hong Kong's Hang Seng fell 0.3% Friday but finished the week with a 6.1% gain. In mainland China, the Shanghai Composite gained 0.1% for the day and 2.2% for the week, reflecting optimism over China's Covid-19 reopening and the loosening of restrictions on the property market.

In Japan, the Nikkei 225 added 0.6% for the day but fell 0.5% for the week.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

(END) Dow Jones Newswires

January 06, 2023 08:49 ET (13:49 GMT)

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