S&P, Nasdaq rise, eye weekly gains as traders boost rate-cut bets after payrolls print

Key U.S. equity averages moved mostly higher Friday, as odds of a December rate cut climbed following November’s U.S. jobs report that points to a slowing yet solid labor market.

Gains for the S&P 500 (SP500) and the Nasdaq Composite (COMP:IND) put the averages on course for new closing highs. This year’s advances for large-cap stocks have been aided by the Federal Reserve starting its rate-cutting cycle that investors expect policymakers to continue this month.

The tech-focused Nasdaq Composite (COMP:IND) +0.7%, and the S&P 500 (SP500) +0.3%. The Dow (DJI) turned lower, slipping -0.1%. The Nasdaq was in line for a weekly rise of ~3%, and while the Dow was looking at a small loss. A third-straight weekly gain was on tap for the S&P 500 (SP500).

November nonfarm payrolls came in at +227K versus the +211K consensus estimate. The unemployment rate rose to 4.2% from 4.1%, in-line with forecasts. October’s +12K print was hit by hurricanes and a workers’ strike at Boeing (BA).

“Looking at the three market average of ~ 160k jobs, we see a healthy, although weakening, job market,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said Friday.

“Despite the strong headline number this morning, the Fed is likely to note the overall slowing in the job market and cut rates by 25 bps in two weeks, unless the next CPI report is white hot,” he said.

The November Consumer Price Index inflation report is due next week. Northlight’s base case is that the CPI won’t deliver a material surprise, Zaccarelli said. Odds jumped to ~87% for a quarter-point rate cut at the Fed’s December 17-18 meeting, from Thursday’s 71% probability, according to the CME FedWatch tool.

The latest payrolls report appears to show the labor market is in a “sustainable full-employment space,” Chicago Fed President Austan Goolsbee said Friday at the bank’s Annual Economic Outlook Symposium.

In the fixed-income market, the 10-year Treasury yield (US10Y) slipped 1 basis point to 4.16%, while the 2-year yield (US2Y) was down 4 basis points at 4.09%.

In other economic news, consumer sentiment drifted up in December, even with higher year-ahead inflation expectations. The University of Michigan’s U.S. Consumer Sentiment report came in at 74.0 versus the 73.0 consensus and 71.8 November levels.

Among active stocks, DocuSign (DOCU) +24.5% and Ulta Beauty (ULTA) +9.6% on strong quarterly results.

In the crypto market, bitcoin (BTC-USD) continued to trade below $100,000, as it hovers above $99,350.