Dow plunged 625, decliners over advancers about 5-1 & NAZ pulled back 389. The MLP index was off 2 to the 302s & the REIT index pulled back 7 to 385. Junk bond funds traded lower & Treasuries were sold, raising yields (more below). Oil jumped 1+ to the 75s on cold weather, supply concerns (more below) & gold advanced 26 to 2716.
Dow Jones Industrials
The US economy added jobs more rapidly than expected in Dec as Federal Reserve policymakers are keeping close tabs on the strength of the labor market ahead of their meeting later this month. The Labor Dept reported that employers added 256K jobs in Dec, well above the estimate. The unemployment rate came in at 4.1%, slightly lower than expectations. The number of jobs added in the prior 2 months were both revised, with job creation in Oct revised up by 7K from a gain of 36K - 43K; while Nov was revised down by 15K from a gain of 227K - 212K. Taken together, those 2 months saw 8K fewer jobs created than previously reported. Private sector payrolls added 223K jobs in Dec, much higher than the 135K estimated. Wage growth was largely in line with expectations, with average earnings up 0.3% on a monthly basis & 3.9% from a year ago. The manufacturing sector saw employment fall by 13K in Dec, a surprise decline when a gain of 5K jobs was expected. Health care added 46K jobs with gains focused in home health care services (+15K), nursing & residential care facilities (+14K) & hospitals (+12K). Health care added an average of 57K jobs per month in 2024, the same as the monthly average in 2023. The retail sector added 43K after it lost 29K jobs in Nov. Last month's gains were focused in clothing, shoe & jewelry retailers (+23K), general merchandise (+13K) & health & personal care (+7K). Retail lost jobs in building materials & garden equipment (-11K). Gov added 33K jobs, slightly lower than the monthly average for 2024 of 37K jobs per month. Last year saw slower growth in gov jobs than in 2023, when the monthly average gain was 59K jobs. The labor force participation rate was unchanged at 62.5%, unchanged from a month ago, & it has remained in a narrow range of 62.5% - 62.7% since Dec 2023. The number of people considered to be long-term unemployed, defined as being jobless for 27 weeks or more, was little changed in Dec at 1.6M but is up by 278K from a year ago. The long-term unemployed accounted for 22.4% of all unemployed people last month.
Oil prices jumped as the Treasury Dept announced sweeping sanctions against Russia's oil industry. Brent gained $2.82 (3.7%) to $79.74 per barrel while US crude oil advanced $2.89 (3.9%) to $76.81 per barrel. The sanctions target Russian oil companies Gazprom Neft & Surgutneftegas & their subsidiaries, more than 180 tankers, & more than a dozen Russian energy officials & execs. The sanctioned execs include Gazprom Neft CEO Aleksandr Valeryevich Dyukov. The sanctioned vessels are mostly oil tankers that are part of Russia’s “shadow fleet” that has dodged existing sanctions on the country's energy exports, according to the Treasury Dept. “The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine,” Treasury Secretary Janet Yellen said. “With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports,” Yellen added. The Biden administration has sought to ratchet up pressure on Russia & dispense aid to Ukraine before Pres-elect Trump takes office.
Oil prices jump as U.S. imposes sweeping sanctions against Russia oil industry
Treasury yields jumped to their highest level since Nov 2023 after the latest jobs data came in stronger the forecast. The 10-year Treasury yield added nearly 6 basis points at 4.743% & the 2-year Treasury surged around 10 basis points at 4.371%. 1 basis point is equal to 0.01% & yields & prices move in opposite directions. Dec's nonfarm payrolls reading showed much stronger than expected job growth (above). The strong labor market data makes it less likely that the Federal Reserve will lower interest rates at its upcoming policy meeting later this month. Fed funds futures trading data is currently pricing in less than 3% odds of a rate cut at the next meeting. Fed meeting minutes from Dec showed that officials were worried about inflation & the impact of Pres-elect Trump's policies & indicated that they would be moving more slowly on interest rate cuts in 2025.
10-year Treasury yield spikes after much hotter than expected jobs report
Stocks plunged as investors digested a final 2024 jobs report that blew past expectations on hiring, raising more uncertainty about the path of interest rates this year. The Dec nonfarm-payrolls report showed a very healthy labor market. The US economy added over 250K jobs in the month, while the unemployment rate fell to 4.1%. That's the good news. The less good news: The strong reading could prompt the Fed to keep rates higher for longer. The 10-year Treasury yield continued a recent uptick today, moving closer to 4.8% to touch its highest levels since late 2023. In recent days, Fed Chair Powell & other officials have made it clear they're slowing down on lowering rates. Amid that tone & after the jobs showing, markets are pricing in no easing before Jul.
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