Dow slid back 48 after a strong opening, advancers barely above decliners & NAZ was up 122. The MLP index fell 2 to the 307s & the REIT index edged 1+ lower to the 424s. Junk bond funds were mixed & Treasuries had limited buying, allowing yields to ease lower (more below). Oil fell 2 to the 67s on supply worries (more below) & gold gained 11 to 2660.
Dow Jones Industrials
US job growth rebounded in Nov with strong payroll gains after the lackluster Oct jobs report reflected labor disruptions due to hurricanes & union strikes. The Labor Dept reported that employers added 227K jobs in Nov, beating the prediction. The unemployment rate ticked higher to 4.2%, up from 4.1% a month ago, also in line with expectations. The number of jobs added in the prior 2 months were both revised higher, with job creation in Sep revised up by 32K from a gain of 223K to 255K, while Oct was revised up by 24K from a gain of 12K to 36K. Private sector payrolls added 194K jobs in Nov, just shy of the 200K estimated. The manufacturing sector saw employment rise by 22K jobs in Nov, including an increase of 32K in transportation equipment manufacturing following the return of workers who were on strike. That follows a decline of 46K manufacturing jobs in Oct, which the Bureau of Labor Statistics attributed largely to strike activity in the transportation equipment manufacturing sector, as about 33K unionized machinists at Boeing (BA), a Dow stock, were on strike from early Sep to early Nov. Health care added 53K jobs in Nov, in line with the sector's average monthly gain of 59K over the prior 12 months. Within the sector, ambulatory health care services added 22K jobs, including 16K jobs in home health care services, while employment also rose in hospitals (+19K) & nursing & residential care facilities (+12K). Leisure & hospitality employment rose by 53K jobs after it was little changed from the prior month. That figure is above the average of 21K jobs added per month in the sector over the last 12 months, with most of the gain occurring at food services & drinking places (+29K). Gov employment rose by 33K jobs, with the growth concentrated in state gov (+20K). The gov sector's gains were mostly in line with the 12-month average gain of 41K. The retail sector lost 28K jobs after it showed little net change in employment levels over the past 12 months. Much of the decline occurred in general merchandise retailers (-15K), while electronics & appliance retailers added 3600 jobs to offset some of the sector's losses.
US job growth beats economists’ expectations after dismal report
Treasury yields traded lower as investors digested key payroll data that kept the door open for another rate cut from the Federal Reserve later this month. The yield on the 10-year Treasury fell 1 basis point to 4.17% & the 2-year Treasury yield declined less than 5 basis points to 4.1%. 1 basis point is equal to 0.01% & yields & prices move in opposite directions. Nonfarm payrolls increased by 227K for the month, compared with an upwardly revised 36K in Oct & the estimate for 214K. The unemployment rate, however, edged higher to 4.2%, as expected. The unemployment rate rose as the labor force participation rate edged lower & the labor force itself declined. This report could shape the Federal Reserve's rate decision at its Dec 17-18 policy meeting. Traders accelerated their bets on a rate cut following the jobs report, with market-implied odds rising above 88% for a qtr percentage point reduction. Earlier this week, Fed chair Jerome Powell reiterated that the central bank will proceed cautiously with rate cuts, given the strong economy. “The labor market is better, and the downside risks appear to be less in the labor market. Growth is definitely stronger than we thought, and inflation is coming [out] a little higher. So the good news is that we can afford to be a little more cautious as we try to find neutral,” Powell said.
Treasury yields dip as November jobs report keeps door open for rate cut
The OPEC+ “precautionary” decision to postpone crude production hikes until after the first qtr bides the group time to assess developments in global demand, European growth & the US economy, according to the coalition's chair, Saudi Energy Minister Abdulaziz bin Salman. Yesterday, the oil producers' alliance agreed to extend several output cuts, with the timeline to start gradually unwinding a 2.2M-barrels-per-day voluntary decline undertaken by a subset of OPEC+ members pushed back by 3 months to Apr. Several group members are delivering a 2nd voluntary production decline, while the coalition as a whole is also restricting production under its formal policy — both now set to stretch until Dec 31, 2026, rather than the previously penciled end of 2025. The Saudi energy minister said OPEC+ had to undertake a “reality check” & reconcile supply-demand signals with market sentiment & attend to “the fundamentals, yet put together something that mitigate these negative sentiments within, of course, the contours of what OPEC+ can do.” OPEC+ faces a spate of variables affecting the supply-demand picture & geopolitical uncertainties, ranging from economic growth amid lowering inflation to conflict in the oil-rich Middle Eastern region & the Jan White House return of Pres-elect Trump — a long-time champion of the US oil industry, who applied protectionist tariffs on China & sanctioned Iran for its nuclear program during his first presidential mandate.
OPEC+ oil output delay a ‘reality check’ as group eyes demand, U.S. outlook, Saudi energy min says
Stocks rose as investors digested the last monthly jobs report of the year, a crucial test of the prospects for interest rate cuts in Dec & beyond. The report largely matched hopes for a "Goldilocks" reading — strong enough to dampen concerns about the economy but soft enough to keep the Fed's options open on lowering rates this month & into next year. Markets are pricing in around 91% odds the Fed lowers rates by a qtr percentage point on Dec 18, compared with about 70% before the report. Meanwhile there is a lot of uncertainty in the oil market.
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