Stocks hold on to gains in a week of mixed economic signals

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U.S. stocks managed to rally for a week after earlier upbeat economic data that suggested inflation was easing was cut on Friday by data showing wages rose the most over the past year or so.

The S&P 500 rose 1.1 percent in the five-day period to close at 4,071 points. The Nasdaq added 2.1 percent. The Dow Jones industrial average, which has now recovered 20 percent from its September lows to enter a new bull market, ended the week up 0.2 percent.

On Wednesday, inflation-adjusted gross domestic product data came in at a revised 2.9 percent annual rate, while gross domestic income rose 0.3 percent in the third quarter, following a 0.8 percent decline in the previous period. The data points to growth that may be enough to slow inflation, but does not yet signal a recession.

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Later that day, in a speech at the Brookings Institution, Federal Reserve Chairman Jerome H. Powell signaled that the central bank would back away from its aggressive pace of tightening, comments that sent stocks sharply higher. Powell also expressed cautious optimism that price pressures will ease, an outlook reinforced Thursday when the core consumer price index posted its second-smallest increase this year.

But Friday’s jobs data threw cold water on the idea that inflationary pressures are easing. Employers added 263,000 jobs in November, well above the average estimate of 200,000 in a Bloomberg survey of economists. While the unemployment rate held steady at 3.7 percent, average hourly earnings rose twice as much as forecast from the previous month’s revision. The report lifted Treasury yields, while stocks fell.

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“The number one issue for the Fed has been wage inflation,” Matt Maley, chief market strategist at Miller Tabak & Co., wrote on Friday, “as the much higher-than-expected average hourly earnings data suggests it’s still high.” it is a problem”:

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Output fell in November for the first time since May 2020, as manufacturing eased for a third straight month of declining orders. But Boeing shares gained on Friday after the Wall Street Journal reported that United Airlines Holdings was close to a deal to buy dozens of 787 Dreamliners.

A key measure of producer prices due Friday will offer the final data Fed officials will see before their Dec. 14 rate decision.

The Treasury will sell 13- and 26-week bills on Monday. In issued trade, they yielded 4.356 percent and 4.685 percent respectively. It will auction the 17-week notes on Wednesday and the four- and eight-week notes on Thursday.

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