Dow’s 500-point surge puts blue-chip gauge on track for weekly gain


U.S. stocks advanced Friday, with the Dow rising 500 points, as monthly Labor Department data showed the pace of job creation cooled in December while wage gains slowed, fueling hopes that the Federal Reserve’s interest rate hikes are starting to have the desired effect.

How are stocks trading
  • The S&P 500 SPX, +1.83% gained 61 points, or 1.6%, to 3,869.
  • Dow Jones Industrial Average DJIA, +1.81% climbed 528 points, or 1.6%, to 33,458.
  • Nasdaq Composite COMP, +2.72% advanced 155 points, or 1.5%, to 10,460.

After several sessions of choppy trade stocks finished lower on Thursday. However, thanks to Friday’s strong rebound, the S&P 500 is on track to finish the week in the green after four consecutive weekly declines.

What’s driving markets

Stock-market bulls cheered Friday’s jobs report, which showed that the pace of job creation and wage growth cooled last month, contradicting labor-market data released earlier in the week.

The December nonfarm payrolls report showed 223,000 jobs were created in December, above expectations for 200,000 new jobs, though the pace of job creation slowed from 256,000 during November. Wages grew by just 0.3% in December, down from 0.4% a month earlier.

See: U.S. adds 223,000 jobs in December and jobless rate matches 55-year low of 3.5%

While stocks advanced in the wake of the data, it seems the labor market has continued to confound expectations for an imminent recession, market analysts said. While the pace of wage growth has slowed slightly, workers continued to command higher pay, even if wages have lagged headline inflation.

“This is not going to push the Fed off its agenda one iota,” said Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., in commentary about Friday’s data.

Numerous Fed officials have made clear that they want to see unemployment climb in order to help suppress inflation and engineer a return to the Fed’s 2% target. Senior Fed officials expect unemployment to rise by nearly a percentage point in 2023, according to projections released in December.

“The release was a win-win from the Fed’s perspective, as it signaled that wage inflation is moderating while job growth remains steady,” said Peter Essele, Head of Portfolio Management, Commonwealth Financial Network. “Coupled with the fact that headline inflation continues to move in the right direction, there’s a growing chance the Fed may be able to navigate a soft landing in the economy. If it meets its target, 2023 could be one of the best years for markets given the amount of negative investor sentiment currently weighing on prices.”

The S&P 500 index is down more than 19% from its 52-week high after the Fed raised interest rates by 4.25 percentage points in 2022 in an attempt to crush inflation that hit a four-decade high of 9.1% in June, according to the consumer-price index.

Jobs data released earlier in the week painted a picture of a labor market that had remained robust despite the Fed’s best efforts, and it’s not clear whether Friday’s data have meaningfully changed this perception, market strategists said.

JOLTS data released Tuesday showed more than 10 million jobs remained open. Analysts noted that the ADP private sector employment report released on Thursday was stronger than expected, which triggered a selloff in stocks.

Later Friday morning in New York, the ISM services sector index for December turned negative for the first time since May 2020, indicating a slowdown in the all-important services sector. The ISM services index slowed to 49.6% in December from 56.5%, below forecast.

The drumbeat of cautious Fedspeak continued on Friday, with Federal Reserve Governor Lisa Cook saying that inflation “remains far too high, despite some encouraging signs lately.” The pace of inflation has cooled in recent months, according to the consumer-price index.

Atlanta Fed President Raphael Bostic said on CNBC Friday that the December jobs data “doesn’t really change my outlook at all.”

A number of other Fed speakers are expected Friday, including Richmond Fed President Tom Barkin at 12:15 p.m. and Kansas City Fed President Esther George at 1 p.m.

Single-stock movers
  • Technology stocks may be under pressure on Friday after Samsung Electronics KR:005930 said quarterly profits fell to an eight-year low as it saw weaker demand for chips and smartphones.
  • Southwest Airlines Co.  LUV, +2.45% shares are worth watching after the airline warned Friday that it expects to report a surprise net loss for the fourth quarter after canceling thousands of flights over the holidays.
  • Tesla Inc. shares are sinking lower after the electric vehicle maker cut prices in China again.
  • World Wrestling Entertainment  WWE, +22.45% shares soared as founder Vince McMahon returned to the company.
  • Shares of Bed Bath & Beyond Inc. BBBY, -21.60% slumped as the company said it was likely to file for bankruptcy.
  • Costco Wholesale Corp.  COST, +6.83% shares climbed on strong holiday sales. 

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