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US STOCKS-Wall St set to rally as December jobs report eases rate worries

Reuters · 01/06/2023 09:15
US STOCKS-Wall St set to rally as December jobs report eases rate worries

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U.S. Dec payrolls up 223,000 vs est 200,000

Tesla falls after cutting prices in China

Futures up: Dow 1.11%, S&P 1.18%, Nasdaq 1.26%

Adds details, comments; updates prices throughout

By Shubham Batra and Ankika Biswas

- Wall Street's main indexes were set to open sharply higher on Friday, as cooling wages and moderation in U.S. jobs growth in December calmed worries over the Federal Reserve's rate-hike trajectory.

The payrolls rose by 223,000 jobs in December, data from the Labor Department showed, while a 0.3% rise in average earnings was smaller than expected and also lower than the previous month.

The for November were revised to show that payrolls rose by 256,000 and average earnings grew by 0.4%.

"The key here is that hourly wages only grew half of the amount since last month, wage inflation is peaking and this is more of a confirmation of it," said Peter Cardillo, chief market economist at Spartan Capital Securities, New York.

"Nonfarm payrolls were high, but as strong as the markets were anticipating."

A resilient labor market has powered the economy through consumer spending but could prompt the Fed to lift its target interest rate above the 5.1% peak it had projected last month and keep it there for a while.

Earlier this week, minutes from the Fed's December meeting showed that the central bank was laser-focused on fighting inflation even as officials agreed to slow the pace of rate hikes to limit risks to economic growth.

Concerns around the rapid rate hikes driving the economy to the brink of a recession was one of the major triggers that clobbered equities in 2022, with the main indexes recording their steepest annual drop since the 2008 financial crisis.

Money market bets of a 25-basis point hike in the February policy meeting shot up to 68% and the terminal rate was seen edging below 5% by June. FEDWATCH

The come a day after the ADP National Employment report showed a higher-than-expected rise in private employment in December, while another report showed weekly jobless claims dropped to a three-month low.

Rate-sensitive growth stocks like Apple Inc AAPL.O, Meta Platforms Inc META.O and Alphabet Inc GOOGL.O gained around 1% each, helped by a decline in the 10-year U.S. Treasury yield US10YT=RR.

Investors will also focus on comments from a slew of Fed officials scheduled to speak later in the day.

Factory orders for November and ISM -manufacturing data for December, due after the opening bell, will also be closely monitored.

U.S. equities were on track to log losses in the first trading week of 2023. The benchmark S&P 500 .SPX has lost 0.8%, while the Nasdaq Composite .IXIC was down 1.5% as of Thursday's close.

At 8:53 a.m. ET, Dow e-minis 1YMcv1 were up 368 points, or 1.11%, S&P 500 e-minis EScv1 were up 45 points, or 1.18%, and Nasdaq 100 e-minis NQcv1 were up 136.75 points, or 1.26%.

Tesla Inc TSLA.O dropped 6.4% in premarket trading after the company cut electric-car prices in China for the second time in less than three months.

Bed Bath & Beyond Inc BBBY.O slid 13.6% after Reuters reported that the home goods retailer was preparing to seek bankruptcy protection in coming weeks.

(Reporting by Shubham Batra, Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur)