- Stocks close higher, with economic data in focus: Equity markets finished higher Wednesday, on a busy day from an economic data standpoint. The ADP private-employment survey showed private employers added 146,000 jobs in November, representing healthy job growth, but it was below the October reading of 184,000.* Additionally, the ISM services PMI for November fell to 52.1 compared with the prior reading of 56, signaling the services sector of the U.S. economy continues to expand, albeit at a more modest pace than the prior month.* Equity-market leadership was narrow, with growth sectors of the S&P 500 such as technology, communication services and consumer discretionary outperforming, while most other sectors finished flat to lower. Overseas, European markets traded mostly higher despite ongoing political uncertainty in France, while Asian markets were mixed overnight. On the corporate front, shares of Salesforce were higher by over 10% following the company's earnings results after the market close yesterday, which showed sales for the quarter were slightly better than analysts expected.* Bond yields closed lower, with the 10-year Treasury yield falling to around 4.18% and the 2-year yield declining to 4.12%.*
- Jobs data in focus this week: A busy week of labor-market data continued today with the release of the ADP Employment survey for November. Today's report showed private employers added 146,000 jobs in November, modestly below expectations for a gain of 158,000 and below last month's downwardly revised reading of 184,000.* Economically sensitive segments of the economy showed the weakest job growth, with manufacturing jobs contracting by 26,000 and small businesses (those with between 1-50 employees) shedding 17,000 jobs.** Meanwhile, large establishments (those with 500+ employees) and services industries, such as education and health services, produced the strongest gains.** Today's report follows yesterday's better-than-expected JOLTS job openings report, which showed job openings increased to 7.7 million in October, 372,000 higher than the prior month and the biggest monthly increase in more than a year.* We'd view this week's data as evidence that labor-market conditions continue to normalize from historically tight levels but remain healthy overall. Perhaps this week's most anticipated release will be the November nonfarm-payrolls report on Friday. Market expectations are for nonfarm payrolls to rise by 215,000, well above the prior month's reading of 12,000, which was negatively impacted by the Boeing machinist strike and hurricanes Helene and Milton.* The unemployment rate is expected to remain unchanged at 4.1%.*
- Overseas politics in focus: Overseas politics remain in the headlines, with the French National Assembly voting to remove the government of Michel Barnier.* The move follows the former prime minister's attempt to push through amendments to the budget without seeking parliamentary approval. A new prime minister will need to be appointed, and the government could be forced to rely on emergency financial measures to roll over government spending limits from 2024 until a new budget is created.* The political uncertainty has surfaced mainly through bond markets, with the spread between the 10-year French and 10-year German government bond yields rising to its highest in more than 10 years, reflecting the uncertain situation in France.* French equity markets looked through the turbulence, with the CAC index finishing higher today.* In addition to the uncertainty in France, the South Korean president declared martial law before subsequently reversing the order and now faces the possibility of impeachment. The Korean KOSPI Index finished sharply lower overnight in response to the instability.*
Brock Weimer, CFA
Investment Strategy
Source: *FactSet **ADP Private Employment Report for November
- Stocks close higher – Major equity markets rose on Tuesday, with the S&P 500 and Nasdaq reaching record highs. Sector performance was mostly lower, as communication services, technology and consumer discretionary stocks led the broader market higher. In global markets, Asia was up, as South Korea and Taiwan technology stocks rallied on new U.S. restrictions on artificial intelligence (AI) chips and components to China. Markets will be focused on the political tension in South Korea, where the president instituted martial law, then subsequently withdrew the declaration. The U.S. dollar dropped versus major currencies. In the commodity space, WTI oil and gold traded higher*.
- Job openings higher than expected – Job openings rose to 7.7 million in October, above estimates and the prior month's figure, both of which were about 7.4 million. The number of people voluntarily leaving their jobs (quits) also increased to 3.3 million, typically indicating confidence in employment prospects, while layoffs were little changed**. These readings reflect a healthy labor market, which should be supportive of consumer spending going into the shortened holiday shopping season and the soft-landing narrative for the economy, in our view. Total nonfarm payrolls will provide a deeper look at the labor market on Friday, with forecasts calling for 215,000 jobs created in November, up from just 12,000 that was impacted by weather and labor strikes in October. The unemployment rate is expected to hold steady at 4.1%*.
- Bond yields tick up – Bond yields rose, with the 10-year Treasury yield at 4.22%, adding to the broader trend higher in recent months. Bond markets have reduced expectations for Federal Reserve (Fed) easing to a slower and shallower path as the moderation in inflation has slowed. Markets are currently pricing in three additional Fed interest-rate cuts over the next seven months, which would put the fed funds rate in the 3.75% - 4.0% range. We agree that the Fed will likely continue cutting rates to move toward a more neutral stance, which should support continued economic expansion.
Brian Therien, CFA
Investment Strategy
Source: *FactSet ** U.S. Bureau of Labor Statistics
- Stocks start the month higher – Major equity markets closed higher on Monday, with large-cap stocks leading small- and mid-cap stocks. Sector performance was mixed, as communication services and consumer discretionary stocks posted the largest gains. In global markets, Asia was up on China's manufacturing purchasing managers index (PMI) for November rising to 51.5, reflecting expansion and beating estimates calling for 50.5*. Europe was also higher, as the eurozone unemployment rate for October held steady at 6.3%, as expected. Bond yields were higher, with the 10-year Treasury yield at about 4.19%. The U.S. dollar advanced versus major currencies. In the commodity space, WTI oil traded higher, while gold was down*.
- Market to focus on the labor market this week – Job openings will be released on Tuesday, with estimates pointing to a modest decline to 7.42 million in October, down from 7.44 million the prior month. Job openings have remained higher than total unemployment of about 7.0 million, although the excess has been steadily narrowing**. Total nonfarm payrolls will be released on Friday, with forecasts calling for 200,000 in November, up from just 12,000 that was impacted by weather and labor strikes in October. The unemployment rate is expected to tick up to 4.2%, from 4.1%*. These forecasts, if realized, reflect a resilient labor market that is gradually cooling, which is supportive of continued moderation in inflation and the soft-landing narrative, in our view.
- Manufacturing readings beat estimates – The Markit Manufacturing Purchasing Managers' Index (PMI) rose to 49.7 in November, above forecasts calling for 48.8. The Institute for Supply Management (ISM) Manufacturing Index also rose to 48.4 in November, beating estimates pointing to 47.5. PMI and ISM are diffusion indexes, with readings above 50.0 reflecting expansion. While both readings still reflect modest contraction, the trend has improved in recent months, which is supportive of resilient economic growth, in our view.
Brian Therien, CFA
Investment Strategy
Source: *FactSet ** U.S. Bureau of Labor Statistics
- Stocks finish higher, capping a strong month: Equity markets finished higher on Friday and capped off a strong month of performance, with the S&P 500 higher by nearly 6% in November.* Leadership was broad-based today, with most sectors of the S&P 500 finishing higher, led by information technology and consumer discretionary.* Overseas, Asian markets were mixed overnight, while European markets were mostly higher following a lower-than-expected eurozone inflation report.* Bond yields ticked lower today, with the 10-year Treasury yield falling to 4.19%, while the 2-year yield closed around 4.17%.* In the commodity space, oil prices ended lower, with WTI crude oil just below $69 per barrel, while gold was up roughly 0.7%.*
- Busy economic week ahead: The week ahead will be a busy one from an economic perspective. We'll get a read on U.S. economic activity with the release of the ISM services and manufacturing PMI's, as well as a look into recent labor-market trends, with all eyes focused on Friday's nonfarm-payroll report for November. On the growth front, the ISM manufacturing PMI is expected to improve to 48 but remain in contraction (reading below 50), while the ISM services PMI is expected to remain well into expansion at 55.4.* Turning to the labor market, expectations are for nonfarm payrolls to rise by 200,000, well above the prior months 12,000 gain, which was negatively impacted by the Boeing machinist strike and hurricanes Helene and Milton.* The unemployment rate is expected to tick higher to 4.2%, up from 4.1% in October.* We expect labor-market conditions to remain healthy over the coming year, providing support to consumer spending and helping to extend the economic expansion.
- Equity markets are on strong footing entering December: Stocks are on pace for another year of strong returns, with the S&P 500 higher by more than 27% year-to-date including dividends.* The healthy returns have been driven by broad participation across a variety of different sectors, with each sector except health care higher by 11% or more this year.* Additionally, S&P 500 earnings are on pace to grow at a healthy 9% clip in 2024 after less than 1% growth in the prior year.* Looking ahead, December has historically been a strong month for stock returns. Since 1970, the S&P 500 has on average gained 1.7% in the month of December, with returns positive 76% of the time.** While there is no guarantee history will repeat itself this year, this could offer investors reason for optimism as we approach the final month of 2024.
Brock Weimer, CFA
Associate Analyst
*FactSet **Morningstar Direct and Edward Jones. S&P 500 total return.
Happy Thanksgiving!