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4:00 p.m. ET: Stocks end higher, partly reversing December’s grim start
Wall Street cheered the Labor Department’s November jobs report, spurring appetite for risk-sensitive assets and showing the U.S. economy’s surprising resilience. Friday’s trading punctuated a whipsaw week that hammered stocks lower.
Here’s where major benchmarks finished Friday’s trading:
S&P 500 (^GSPC): +0.91%, or 28.48 points
Dow (^DJI): +1.22%, or 337.27 points
Nasdaq (^IXIC): +1.00%, or 85.83 points
10-year Treasury yield (^TNX): +4.7 bps to 1.842%
Gold (GC=F): -1.25% to $1,464.60 per ounce
3:25 pm. ET: Jefferies sees 2020 as the ‘year of normalizaiton’
Yahoo Finance has been keeping close track of next year’s market calls. The latest comes from Jefferies, which believes investors will be focused on “traditional drivers” in 2020. The firm believes stocks will stabilize and appreciate slightly after more than a year’s worth of choppy equity trading.
2:05 p.m. ET: ICYMI...JPMorgan is having a big day
JPMorgan’s (JPM) stock set a new intraday record, and is holding those gains heading into the close. No major driver other than Wall Street’s big rally, but the bank is just a couple of months removed from a Q3 earnings report that saw record revenue.
1:37 p.m. ET: The yield curve cancels the recession
According to Tradeweb data, the 3-month/10-year Treasury spread has been steepening all week, and currently sits near 31.5 bps — a change of 18.7 bps.This spread’s steepest close over the last 12 months is 49.0 bps, reached in December 2018.
Recall that the 3/10 spread is used by the Federal Reserve Bank of New York and the Federal Reserve Bank of San Francisco as a recession indicator, and was the subject of feverish market speculation when the yield curve briefly inverted earlier this year.
1:00 p.m. ET: ‘Wild’ jobs report pushes back Fed expectations
Economists — once they picked their jaws up off the floor — had high praise for November’s monster jobs report. Despite the fact that it’s likely to keep the Fed in ‘wait and see’ mode (indeed, UBS on Friday changed its Fed call to no cut until March), Wall Street had lots of euphemisms for the payrolls report.
Honorable mention goes to Pantheon’s Ian Shepherdson, who called the data “wild” and “astonishing”:
“A repeat of this performance in December would be a different story, but we think downside correction is more likely. Still, today’s print clearly makes a January Fed easing much less likely,” he added.
12:22 p.m. ET: Don’t forget about the trade war
Stocks are riding high in midday trading after the jobs and consumer data. Of course, the trade war still looms large, with the White House’s Larry Kudlow telling reporters that there was “no arbitrary deadline” — but that next week’s deadline remained crucial. He also warned that Trump could still walk away if there’s no agreement.
10:30 a.m. ET: Nasdaq’s CEO on ‘resilient’ economy
In a sitdown with Yahoo Finance before Friday’s monster jobs report, Nasdaq chief Adena Friedman (who’s a black belt, by the way) says that investors can put away their recession worries for the time being. “The economy continues to grow,” she says. “We are continuing to show that the U.S. economy has been very resilient.”
10 a.m. ET: Consumer sentiment firms in December
As if stocks needed any more good news, the University of Michigan consumer sentiment index jumped by 2+ points to 99.2 in the preliminary December reading. The index beat expectations and was the highest since May, something that JPMorgan notes is an indication “that the trend for spending is still decent.”
Wall Street took another leg higher after the report, and is hovering near session highs.
9:35 a.m. ET: OPEC agrees to production cuts worth 500,000 barrels per day
Crude (^CL=F) is slightly weaker after the oil cartel agreed to cut crude production to bolster sagging oil prices in a widely expected move. By all indications, OPEC’s agreement was hard-fought, as resistance from key oil producers like Iraq made it difficult to forge consensus.
Eurasia Group points out that the move is unlikely to do much for prices, with major questions hanging over the global economy and demand in 2020:
This year, global consumption will increase by just 1% despite world economic growth expected to come in around 3%. Should the economy stall next year amid ongoing trade disputes, it is possible for oil demand growth to at least temporarily grind to a halt.
With US oil production already at an unprecedented 13 million bpd and targeting 14 million bpd next year while production is also rising in other non-OPEC countries like Brazil and Norway, OPEC may feel forced to deepen its cuts after March 2020 to avoid the build-up of a large supply overhang like the ones in 2018 and 2015 that triggered sharp price falls.
The U.S. shale boom, which has vaulted America into the ranks of the world’s top oil producers, is also a factor, Eurasia notes:
...OPEC must be careful not to cut so deep that prices shoot to levels that would allow US shale producers to go into another drilling frenzy. US shale production has its unique set of problems around production challenges, investor pressure to focus on cash creation. While an extension of OPEC cuts beyond 2020 is possible, it would come with a risk of spurring the next shale boom. It could also trigger President Trump to release strategic petroleum reserves ahead of 2020 elections in order to cap fuel prices.
9:30 a.m. ET: Stocks rally after US jobs report
What trade war? Markets soar on news that the U.S. added 266,000 jobs last month, well above Wall Street’s consensus forecasts and momentarily allaying fears about the Sino-American trade negotiations.
Here’s where major benchmarks began trading:
S&P 500 (^GSPC): +0.73%, or 22.79 points
Dow (^DJI): +0.84%, or 233 points
Nasdaq (^IXIC): +0.76%, or 65 points
Crude (^CL=F): -0.6% to $58.08
10-year Treasury yield (^TNX): flat to 1.8640%
Gold (GC=F): -1.16% to $1,465.90 per ounce
The monster jobs report has two sides: it suggests the jobs market is solid in the face of global trade tensions, but it may keep the Federal Reserve on hold. According to Capital Economics:
The much stronger than expected 266,000 gain in non-farm payrolls in November was flattered by the return of 41,000 striking GM workers but, even allowing for that, it suggests labour market conditions remain solid. It also supports our view that the Fed is unlikely to deliver any further policy loosening.