Stock Market Update

[BRIEFING.COM] The stock market got a dose of welcome news before today's open when the November employment report tracked largely in-line with consensus expectations. The benefit of that is that those expectations were aligned with a soft landing/no landing outlook that reinforced the market's hopeful view about earnings growth and the prospect of another rate cut at the December 17-18 FOMC meeting.

The latter quickly resonated in the fed funds futures market, which saw the probability of a 25-basis points cut in the target range for the fed funds rate to 4.25-4.50% go from 70.1% to north of 90.0%. It currently sits at 85.1%, according to the CME FedWatch Tool. 

The 2-yr note yield, which is more sensitive to changes in the fed funds rate, followed suit, sliding from 4.17% in front of the report to 4.08% after its release. It is currently at 4.10%, down five basis points from yesterday. The 10-yr note yield went from 4.18% to 4.13% and is now at 4.16%, down two basis points from yesterday.

The drop in market rates, coupled with pleasing earnings results and guidance from several growth companies, like lululemon athletica (LULU 406.61, +61.80, +17.90), DocuSign (DOCU 107.14, 23.46, +28.0%), and Ulta Beauty (ULTA 432.23, +39.36, +10.0%), set the stage for a positive start for the major indices. They answered that call and traded higher at the opening bell, yet their momentum got stifled when the S&P 500 met resistance at the 6,100 level.

Buying interest waned after the S&P 500 failed to clear that mark, but to be fair, there hasn't been a lot of selling conviction either.

The indices have drawn support from the relative strength of the mega-cap stocks, which has been an underpinning factor throughout the week, and the small-cap stocks. The Vanguard Mega-Cap Growth ETF (MGK) is up 0.5% and the Russell 2000 is up 0.4%. The broader market, however, is on a mixed track.

Decliners lead advancers by a 5-to-4 margin at the NYSE while advancers lead decliners by a 3-to-2 margin at the Nasdaq. The equal-weighted S&P 500 is down 0.1%.

Led by lululemon athletica and Ulta Beauty, the S&P 500 consumer discretionary sector (+1.3%) sits atop the sector rankings along with the communication services sector (+1.3%). Today's weakest sector links are the energy sector (-1.4%), weighed down by Chevron (CVX 155.92, -3.41, -2.1%) after the oil giant cuts its capex budget for 2025, and the utilities sector (-1.4%).  

Reviewing today's economic data:

• November nonfarm payrolls increased by 227,000 (Briefing.com consensus 200,000). November private sector payrolls increased by 194,000 (Briefing.com consensus 200,000). November unemployment rate was 4.2% (Briefing.com consensus 4.2%), versus 4.1% in October. November average hourly earnings were up 0.4% (Briefing.com consensus 0.3%) versus 0.4% in October.
  • The key takeaway from the report is that it has satisfied the market's December rate cut curiosity in the sense that it gives the Fed cover, absent what we may see in next week's CPI and PPI reports, to cut the target range for the fed funds rate by another 25 basis points at the December FOMC meeting.
• The preliminary University of Michigan Index of Consumer Sentiment for December increased to 74.0 (Briefing.com consensus 73.5) from the final reading of 71.8 for November. In the same period a year ago, the index stood at 69.7.
  • The key takeaway from the report is the understanding that consumers were targeting the purchase of durables now to avoid what they think will be higher prices in the future.