Stocks barely finished in positive territory on Friday, closing out a brutal first week of the new year.
The Dow Jones Industrial Average gained 25 points, or 0.07%, while the S&P 500 advanced 0.18%, and the Nasdaq rose 0.09%.
All of the three major averages ended a nine-week winning streak. The Nasdaq fell 3.25% for its worst weekly performance since September. The S&P 500 dropped 1.52% and the Dow lost 0.59%.
The headline ISM services index slipped to 50.6 points, just over the 50 mark that separates growth from contraction, while the hiring component slumped to the lowest levels in at least two decades.
The December US jobs report showed the economy added 216,000 jobs last month, higher than the 175,000 expected by economists. The unemployment rate was unchanged at 3.7%.
Sam Millette, director of fixed income for Commonwealth Financial Network, said the unexpectedly strong result was driven in part by increased government hiring as well as the gains in the education and health services sector.
"Equity market futures and bond prices fell following the release, as investors reassessed the likelihood of a potential rate cut in March due to the hotter than expected labor market in December," he said. "Odds for a rate cut in March fell from over 80% a week ago to roughly 50/50 immediately following this morning’s release."
Updated at 12:15 PM EST
Holding gains
Stocks are holding onto meagre gains heading into the early afternoon session, with the S&P 500 up just 7 points, or 0.11%, and the Dow slipped 68 points to take its short-week decline to around 0.66%. The Nasdaq, meanwhile, added 26 points, or 0.16%.
Updated at 10:21 AM EST
Services softness
The most important sector of the U.S. economy slowed sharply over the final month of the year, data from the closely-tracked ISM survey indicated Friday, softening the impact of a stronger-than-expected jobs report.
The headline ISM services index slipped to 50.6 points, just over the 50 mark that separates growth from contraction, while the hiring component slumped to the lowest levels in at least two decades.
Stocks are climbing higher as a result, with the S&P 500 now 23 points, or 0.5%, into the green, with the Dow up 125 points.
Treasury yields are also declining, with benchmark 10-year notes falling back below 4%, to 3.98%, following the ISM data release.
For context, here is full history of employment component in ISM Services … current reading of 43.3 was actually never reached in 2001 recession pic.twitter.com/DmQyqUWSEB
— Liz Ann Sonders (@LizAnnSonders) January 5, 2024
Updated at 9:59 AM EST
Buy the fact
Stocks are nudging higher in the opening half hour of trading, with investors perhaps looking to snap-up some oversold names, including the mega-cap Magnificent Seven tech giants, following a solid December jobs report that bodes well for consumer spending into the start of the year.
"Give me a solid labor market with disinflation all day long," said Jamie Cox, Managing Partner for Harris Financial Group in Richmond, Virginia, "A strong, employed consumer trumps all."
"If your recession call is predicated on job losses, this report isn't for you," he added.
The S&P 500, which is down 1.7% for the week, was marked 11 points higher, or 0.24%, in early dealing, with the Dow gaining 15 points. The Nasdaq, meanwhile, was marked 35 points higher, or 0.24%.
Updated at 8:43 AM EST
Another jobs surprise
Markets were caught off-guard once again by a stronger-than-expected non-farm payroll report, which showed December gains of 216,000 and a headline unemployment rate of 3.7%.
Wage gains were faster than forecast, as well, with average hourly earnings rising 4.1% from last year, testing the market's assumption that the Fed will start cutting rates in early spring.
Stocks were moving lower in the wake of the release, with futures tied to the S&P 500 indicating a 17 point opening bell decline and those linked to the Dow suggesting a 120 point pullback.
Related: Jobs report shows 216,000 new hires, testing bets on spring Fed rate cuts
Stock Market Today
Faster inflation figures from Europe, alongside stronger-than-expected jobs data from the U.S. this week, have set the table for an upside surprise from the Labor Department's nonfarm-payrolls report, which is expected at 8:30 a.m. U.S. Eastern time.
The figures have also triggered the biggest Treasury bond market selloff since October, which has lifted benchmark 10-year-note yields more than 18 basis points this week to 4.045% in early New York trading.
Benchmark 2-year notes, meanwhile, were pegged at 4.429%. And the U.S. dollar index, which tracks the greenback against a basket of its global peers, added to this week's gains – the strongest since May – with a 0.25% rise to change hands at 102.738.
The Treasury market repricing has also reduced bets that the Federal Reserve will cut interest rates this spring. The odds of a March reduction have fallen to around 60% from a 74% chance at the end of last year.
Focus now turns to today's jobs report, which is expected to show a net gain of 175,000 new hires, with wage growth moderating to an annual rate of 3.9% and the headline unemployment rate rising to 3.8%.
A firmer overall tally, however, would add to evidence that the job market could still stoke inflation pressures into the early months of this year and accelerate bond and stock market losses, which have been tied to Fed rate cuts.
The S&P 500, in fact, has retreated around 1.7% so far this week, taking the broadest benchmark of U.S. shares back to levels last seen prior to the Fed's December policy meeting.
Heading into the start of the trading day, futures contracts tied to the S&P 500 are priced for an 11 point opening-bell decline while those linked to the Dow Jones Industrial Average are indicating a 60 point pullback.
The tech focused Nasdaq, which has led decliners this year with a 3.3% slump thanks to big downside moves for mega-cap tech stocks, is set to open 60 points lower.
In Europe, where inflation was estimated to have surged to 2.9% in December, stocks are weaker in early Frankfurt trading. The Stoxx 600 was down 0.9% as traders pared bets on a near-term move on rates from the European Central Bank.
Overnight in Asia, stocks followed Wall Street lower, with the regionwide MSCI ex-Japan index falling 0.45% into the close of trading. Japan's Nikkei 225 gained 0.27% as traders bet the New Year's Day earthquake would likely delay any plans by the Bank of Japan to alter its ultraloose monetary stance.
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