S&P, Nasdaq up, as traders lift rate-cut bets after November payrolls print; Dow down

Key U.S. equity averages were mostly higher Friday, as odds of a December rate cut increased following November’s U.S. jobs report that pointed 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 will continue this month.

The tech-focused Nasdaq Composite (COMP:IND) +0.6%, and the S&P 500 (SP500) +0.2%. The Dow (DJI), meanwhile, -0.2%, with Nvidia (NVDA) and Chevron (CVX) among losing stocks. For the week, the Nasdaq was in line for a 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. Odds for a quarter-point rate cut at the Fed’s December 17-18 meeting jumped to ~85% on Friday, from Thursday’s 71% probability, according to the CME FedWatch tool.

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

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.

Meanwhile, Cleveland Fed President Beth Hammack said she favors taking a slow pace in adjusting interest rates.

“Moving slowly will allow us to calibrate policy to the appropriately restrictive level over time given the underlying strength in the economy,” she said Friday at the City Club of Cleveland, according to prepared remarks.

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 73.0 consensus, and 71.8 in November.

Five sectors on S&P 500 (SP500) rose, paced by Consumer Discretionary +1.6%. Energy -1.4%, down with five other groups.

Among active stocks, Lululemon (LULU) +18%, the best S&P 500 (SP500) performer after the yoga clothing maker raised its FY24 guidance above expectations and increased its share buyback program by $1B.

DocuSign (DOCU) +28% and Ulta Beauty (ULTA) +10% on strong quarterly results.

UnitedHealth Group (UNH) -4%, the steepest decliner on the Dow (DJI), deepening a weekly loss after Wednesday’s murder of Brian Thomspon, head of its health benefits unit.

In the crypto market, bitcoin (BTC-USD) pared losses and traded above $101,000 after this week’s rise above $100K for the first time ever.