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Wall St rallies as jobs, services data calm rate hike worries

Published 01/06/2023, 06:35 AM
Updated 01/06/2023, 06:10 PM
© Reuters. FILE PHOTO: Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

By Sinéad Carew and Ankika Biswas

(Reuters) - Wall Street's main indexes all gained more than 2% on Friday after December payrolls expanded more than expected even as wage increases slowed and services activity contracted, easing worries about the Federal Reserve's interest rate hiking path.

U.S. nonfarm payrolls rose by 223,000 jobs in December, Labor Department data showed, while a 0.3% rise in average earnings was smaller than expected and less than the previous month's 0.4%.

In another set of data, U.S. services activity declined for the first time in more than 2-1/2 years in December as demand weakened, with more signs of inflation easing.

"We got good news on the inflation front with wage gains that are slowing. We got participation rates pick up again and yet we're still creating jobs. It's a kind of a win-win for the economy. And on the other side the ISM services report was really weak and broadly weak," said Megan Horneman, chief investment officer at Verdence Capital Management in Hunt Valley, Maryland.

"That's basically making people think the Fed is nearing the end of what's been one of the most aggressive tightening cycles we've seen in decades. That's why the markets are taking off."

By 4:23 p.m. ET, the Dow Jones Industrial Average rose 700.53 points, or 2.13%, to 33,630.61; the S&P 500 gained 86.98 points, or 2.28%, at 3,895.08; and the Nasdaq Composite added 264.05 points, or 2.56%, at 10,569.29.

Friday's rally boosted the benchmark S&P and the Nasdaq enough to snap four weeks of declines. For the holiday-shortened week, the S&P rose 1.45% while the Nasdaq added 0.98% and the Dow advanced by 1.46%.

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For the gains, John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio, pointed to a calming of anxiety that the Fed would raise rates so much that it causes a recession.

"Today's reports may alleviate that pressure to force a recession. They may already have slowed down the economy enough. They just need validation from inflation reports."

Still the Fed last month projected an a interest rate target peak of around 5% and said it would keep rates high until inflation is where it wants it to be.

Fed officials on Friday acknowledged cooling wage growth and other signs of a gradually slowing economy, with Atlanta President Raphael Bostic hinting at the chance of a quarter percentage point hike at the next policy meeting.

But Huntington's Augustine said the central bank needs to see further slowing of price increases in the December inflation report, due out on Thursday, before deciding whether to slow its next rate hike. It raised rates 50 basis points in December.

Also next week several of the biggest U.S. banks including JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) will kick off the fourth-quarter earnings season on Friday.

"That's the part of the puzzle people haven't been able to figure out. How much should earnings estimates be cut for the calendar year or have they been cut enough?" said Horneman at Verdence.

All the major S&P 500 indexes gained with materials' 3.44% increase leading the pack. Interest-rate sensitive technology was next with a 2.99% gain.

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The weakest sector was healthcare, which rose 0.89% followed by energy's 1.68% increase.

Consumer staples was boosted by Costco Wholesale Corp (NASDAQ:COST), whose shares jumped 7% after the membership-only retailer reported strong December sales growth.

Shares in Biogen Inc (NASDAQ:BIIB) closed up 2.8% after the U.S. Food and Drug Administration on Friday approved the Alzheimer's drug lecanemab developed by Eisai Co (OTC:ESALY) Ltd and Biogen for patients in the earliest stages of the disease. Eisai's U.S. shares closed up 4% at $64.20.

Pfizer Inc (NYSE:PFE) shares advanced 2.5% after reports of talks with China to secure a license that will allow domestic drugmakers to manufacture and distribute a generic version of the U.S. company's COVID-19 antiviral drug Paxlovid in China.

Bed Bath & Beyond Inc (NASDAQ:BBBY) tumbled 22% after Reuters reported that the home goods retailer was preparing to seek bankruptcy protection in coming weeks.

Advancing issues outnumbered decliners on the NYSE by a 6.69-to-1 ratio; on Nasdaq, a 2.59-to-1 ratio favored advancers.

The S&P 500 posted 18 new 52-week highs and five new lows; the Nasdaq Composite recorded 97 new highs and 65 new lows.

On U.S. exchanges 11.15 billion shares changed hands compared with the 10.84 billion average for the full session over the last 20 trading days.

Latest comments

90% of all stocks are owed by those in the top 10% of wealth
Uncle Sugar is butting heads with oil on replenishing inventories. Look for oil to go over a hundred.
Can't resist temptation. Had to pick up 20k DIA puts for next week. See you on the other side.
If you feel the DOW belongs at $336, you can follow your lead. I feel otherwise.
Nice bet. Best wishes for a windfall. That's a lot of ETF options. I prefer future contracts for trading hours and tax reasons.
Ronald do your puts expire by next week
Wait...what? "cooling wage growth and other signs of the economy gradually slowing".. Is this for real and the reason stocks are rising? Peak lunacy!!
mitch there is no "them"....
mitch is back with more fear and paranoia.....
need 50 points. 2% after 2 years of almost 15% (~total) is bad goal. basically need 0% next 6 years to even it out to 2%.
Wall Street is putting a razors edge on the financial knife they're preparing to plunge into the back of the US working class heading into the first weekend of '23.  The first Friday of "trade" this year in this criminally manipulated JOKE of a "market" sets a new precedent for criminal manipulation.  Time again to assume the proper position America.
If you feel this strongly why dont you just get out of the US and try and find another market that isnt “manipulated”
to many experts predicting a stock market crash.....from wall street fund managers to financial magazines.... this week's price action suggest my next target of 4300 S&P in the first quarter is still possible.
you're kidding. right?
Almost every big green day like today has been followed by aggressive selling the next week. We are still in a bear market, which is going to last because now earnings are going to weaken (due to higher cost of capital, lower demand, and lower consumer discretionary income) which makes for higher P/Es hence lower prices for stocks are coming.
There's been crazy selling all week. Investors moving to cash? I'm anticipating a red Monday after this rally. Topped out for more selling. Most of it will probably happen Sunday night.
job numbers are higher. Now good news is good news. The investors must have tons of money and no interest rates! Strange I thought the opposite was true. Less liquidity due to fed tightening and higher interest rates. Weird.
Yesterday's ADP report raised expectation for today's reports
wow finally someone looked at a chart
The job numbers indicate a thriving economy. So how does this translate to the Fed easing?
it doesn't ... it's just a stupid game
Another tightrope walk as the intraday volatility magically vanishes into thin air.  Will the laughingstock of the financial world plunge "in late trade?"  GREATEST FINANCIAL FRAUD IN WORLD HISTORY.
the market is go up but this will the inflation go up too. this is bad
Higher stock market supports inflation.
adding job means wage rise pressure.
not necessarily. the job increase was primarily associated at the low end of the wage group
Yesterday was fear of fed tightening. Unbelievable
  ADP report yesterday raised expectation for today's reports, which were below expectation, which, as headline says, "calm rate hike worries".
Vetter the evaluation of risk changes from day to day the total amount of information never stays the same....
first last ...Vetter by his posts, seems to be intelligent, but fails in his analysis because of his inability to precieve the gray areas and assumed everything is ether black or white.
Nothing happened that will change what the Fed has always said it will do.
Complete opposite from yesterday's news. More evidence that these markets are just a rigged casino. News holds no value and serves only as a cover for the FED and CBS to move markets up and down on a string
Another joke they just do bad and bad again and again. Any good news. It is not heathy enviroment for anyone. So it will crash even more. You can for this all media and governments. You are not able work on better enviroment. What you just do restriction and it will k...il...l you
some been smokin tha ganja
Ohh, it's written under fake news spreader the faqing great Reuters 🤣
higher interest rates are needed even more
true. but that won't be enough either. There will be mass numbers of bankruptcies in corporate America. personal and credit card debt is at ATH. Financial companies and banks are bracing for massive increases in loan defaults. The economy has no choice but recession.
Lol
That article title is a nonsense.
the algos reaction is nonsense, lol
Market has been going up.  Dec job report was released.
And bond yields has been going down.
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