Stronger Than Expected Jobs Data May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to give back ground after ending the previous session mostly higher.

The futures came under pressure following the release of a highly anticipated Labor Department report showing employment in the U.S. increased by more than expected in the month of November.

The report said non-farm payroll employment jumped by 199,000 jobs in November after rising by 150,000 jobs in October. Economists had expected employment to climb by 180,000 jobs.

The Labor Department also said the unemployment rate dipped to 3.7 percent in November from 3.9 percent in October. The unemployment rate was expected to remain unchanged.

Treasury yields have jumped following the release of the report, as the data has partly offset recent optimism that the Federal Reserve could pivot toward interest rate cuts as soon as March 2024.

Shortly after the start of trading, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of December.

While the consumer sentiment index is expected to inch up to 62.0 in December after falling to 61.3 in November, traders may pay closer attention to the report’s readings on inflation expectations.

After moving mostly higher early in the session, stocks continued to turn in a strong performance throughout much of the trading day on Thursday. The major averages moved back to the upside following the downturn seen on Wednesday, with the tech-heavy Nasdaq leading the rebound.

The Nasdaq jumped 193.28 points or 1.4 percent to 14,339.99, reaching its best closing level in over four months. The S&P 500 also advanced 36.25 points or 0.8 percent to 4,585.59, while the narrower Dow posted a more modest gain, edging up 62.95 points or 0.2 percent to 36,117.38.

The strength on Wall Street partly reflected ongoing optimism about the outlook for interest rates ahead of the release of the Labor Department’s closely watched monthly jobs report.

A day ahead of the release of the monthly jobs report, the Labor Department released a report showing a slight uptick in first-time claims for U.S. unemployment benefits in the week ended December 2nd.

The report said initial jobless claims ticked up to 220,000, an increase of 1,000 from the previous week’s revised level of 219,000.

Economist had expected jobless claims to rise to 222,000 from the 218,000 originally reported for the previous week.

Semiconductor stocks showed a substantial move to the upside on the day, driving the Philadelphia Semiconductor Index up by 2.8 percent.

Chipmaker Advanced Micro Devices (AMD) moved sharply higher after Meta (META), Microsoft (MSFT) and OpenAI said they will use the company’s newest AI chip, the Instinct MI300X.

Substantial strength was also visible among airline stocks, with the NYSE Arca Airline Index soaring by 2.6 percent to its best closing level in almost four months.

Computer hardware, banking and housing stocks also saw considerable strength, while gold and oil stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are jumping $1.43 to $70.77 a barrel after edging down $0.04 to $69.34 a barrel on Thursday. Meanwhile, after slipping $1.50 to $2,046.40 an ounce in the previous session, gold futures are falling $15.20 to $2,031.20 an ounce.

On the currency front, the U.S. dollar is trading at 144.25 yen versus the 144.13 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0759 compared to yesterday’s $1.0794.

Asia

Asian stocks ended Friday’s session on a mixed note amid speculation that the Bank of Japan may end its negative interest rate policy as soon as this month.

Gold traded in a narrow range, while the dollar and Treasury yields were little changed as investors awaited U.S. jobs data later in the day for clues on the Fed’s rate trajectory.

Oil prices jumped around 2 percent in Asian trading after calls from Saudi Arabia and Russia for OPEC+ members to join output cuts.

Chinese shares edged up slightly as benchmark indexes approached key technical levels amid a relentless sell-off.

The benchmark Shanghai Composite Index edged up 0.1 percent to 2,969.56, while Hong Kong’s Hang Seng Index ended marginally lower at 16,334.37 after a choppy session.

Japanese shares fell for a second straight session as the yen hit its strongest level versus the dollar in four months on hawkish comments from BoJ Governor Kazuo Ueda following discussions with the Japanese Prime Minister.

Japan’s third-quarter GDP was revised downward in a surprise move and a measure of the country’s household spending fell for an eighth month in a row in October, adding to the downbeat sentiment.

The Nikkei 225 Index tumbled 1.7 percent to 32,307.86, dragged down by exporters such as automakers. The broader Topix Index settled 1.5 percent lower at 2,324.47.

Seoul stocks rallied as tech stocks such as Samsung Electronics and SK Hynix soared amid renewed optimism on artificial intelligence. The Kospi climbed 1.0 percent to 2,517.85. Steel giant POSCO Holdings jumped 5.5 percent to 471,500 won.

Australian markets eked out modest gains as energy stocks advanced, more than offsetting declines in the banking and gold mining sectors.

The benchmark S&P/ASX 200 Index rose 0.3 percent to 7,194.90, while the broader All Ordinaries Index closed up 0.3 percent at 7,405.60.

Oil and gas producer Santos surged 6.2 percent after confirming initial talks with larger rival Woodside Energy over a $53 billion merger.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index trimmed early losses to finish marginally lower at 11,495.64.

Europe

European stocks are modestly higher on Friday as investors assess the latest inflation data from Germany as well as the key U.S. employment report.

According to the final estimate, Germany’s consumer price inflation (CPI) fell to its lowest in 29 months in November, matching provisional estimates released last week.

CPI fell to an annual 3.2 percent last month from 3.8 percent in October, bolstering the case for a peak in eurozone interest rates.

While the French CAC 40 Index has advanced by 0.6 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.2 percent.

Oil & gas giant BP Plc and peer Shell have moved to the upside in London as oil prices jump after calls from Saudi Arabia and Russia for OPEC+ members to join output cuts.

Monks Investment Trust has also shown a notable move to the upside after reporting narrower loss in first half of the year.

Fintech company IG Group has also rallied as it announced the appointment of Breon Corcoran as its new chief executive officer, effective January 29, 2024.

Vivendi shares have also jumped in Paris. The media conglomerate is set to replace digital payment group Worldline on the CAC 40 index, effective from December 18.

On the other hand, Berkeley Group Holdings has moved notably lower after it flagged persisting housing demand woes.

Miner Anglo American has also shown a significant move to the downside after it announced plans to slash production in a bid to cut costs.

U.S. Economic Reports

Employment in the U.S. increased by more than expected in the month of November, according to a highly anticipated report released by the Labor Department on Friday.

The report said non-farm payroll employment jumped by 199,000 jobs in November after rising by 150,000 jobs in October. Economists had expected employment to climb by 180,000 jobs.

Meanwhile, the Labor Department said the unemployment rate dipped to 3.7 percent in November from 3.9 percent in October. The unemployment rate was expected to remain unchanged.

At 10 am ET, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of December. The consumer sentiment index is expected to inch up to 62.0 in December after falling to 61.3 in November.

Stocks In Focus

Shares of Carrier Global (CARR) are moving sharply higher in pre-market trading after the global leader in intelligent climate and energy solutions announced an agreement to sell its security business Global Access Solutions to Honeywell (HON) for $4.95 billion.

Solar energy company First Solar (FSLR) is also likely to see initial strength after Morgan Stanley upgraded its rating on the company’s stock to Overweight from Equal Weight.

Meanwhile, shares of RH (RH) may come under pressure after the upscale home-furnishings company reported fiscal third quarter revenues that missed analyst estimates and narrowed its full-year revenue guidance.

Athletic apparel retailer Lululemon (LULU) may also move to the downside after reporting better than expected fiscal third quarter results but providing disappointing revenue guidance for the current quarter.