Below are the economic and market highlights for the week:
- Nonfarm payrolls increased 227K in November, topping estimates of 214K. That was a significant rebound from October’s upwardly revised 36K, having been negatively impacted by the Boeing labor strike and violent storms in the Southeast. Meanwhile, the unemployment rate rose to 4.20% as the labor force participation rate moved lower and the labor force itself declined. Wage gains, however, remained sticky, up 0.40% for the month and 4% on a 12-month basis.
- Service-oriented companies in the U.S. grew at their slowest pace in three months. The ISM Services Index slipped to 52.1 in November, down from October’s 56. Numbers above 50 indicate expansion while those below signal contraction. The decline was driven by a drop in new orders and employment.
- U.S. manufacturers posted a big jump in orders in November, their largest increase since the spring. The ISM Manufacturing Index rose to 48.4, up from October’s 46.5. Although still in contraction territory, the topline figure showed some improvement helped by new orders, production, and employment. Prices also continued to ease with the price index, a measure of inflation, dropping 4.5 points to 50. As an additional sign that inflation has mostly evaporated, the prices gauge is now back to prepandemic levels.
Rebound in Jobs Propels Markets to New Highs
The three major indices smashed their way to new record highs this week. On Wednesday, the Dow Jones Industrial Average posted its first close above 45,000. The S&P 500 and Nasdaq followed suit, recording new highs on Wednesday and Friday. Better than expected tech earnings from cloud-based software maker Salesforce and chipmaker Marvell helped power those indices higher. The Technology Select SPDR ETF also posted a record high, its first all-time high since July. Tech shares have lagged the broader market since summer as bulls have focused on adding more economically sensitive stock to their portfolios in anticipation that economic momentum will surge on lower rates. On the economic front, the jobs market came roaring back in November as the effects of Boeing’s labor strike and hurricane related storms dissipated. The services industry also continued to expand in November – albeit at a slower clip – as companies took a more cautious approach with their orders as they wait to see how the incoming administration’s policies will affect tax and trade. Meanwhile, manufacturing improved but still remains mired in recession.
Data wise, the economy remains on solid footing with markets applauding Friday’s non-farm payrolls report. Even though the numbers only slightly beat forecasts, it was the fact that November rebounded strongly from a weak, albeit tainted, October print that was encouraging to investors. November’s print was seen as strong, but not so strong as to derail the Fed from cutting when it meets in two weeks. Oddly, markets seemed to ignore the uptick in wage growth altogether, and focused instead on the slight uptick in the unemployment rate and the net loss of 355,000 jobs from the household survey as evidence that the Fed will no longer view the labor market as a potential source of inflation. Following Friday’s jobs report release, traders have priced in an 88% chance for a quarter point reduction at the Fed’s December 18th meeting – up from 70% just yesterday. Before that happens, however, policymakers will have another batch of inflation and retail sales reports to consider ahead of the announcement. Those releases are unlikely to crush the holiday spirit, but if they show signs that prices are inflecting higher, it could lead the Fed to alter its interest rate projections for 2025.
The Week Ahead
Key reports include CPI, PPI, and wholesale inventories.
Oh, What Fun!
Earlier this week, all of us at Probity Advisors along with children and spouses gathered for a heartwarming and memory-making celebration for the holidays. Our office transformed into a hub of festive and cheerful merriment, and we thankfully captured the moments in the photos below.
One of our conference rooms was transformed into an ornament making workshop. A classic Christmas movie played in the library, and a variety of games were enjoyed. We experienced meaningful conversations and connections with colleagues and friends. Our office was filled with so much warmth and joy, and we took the opportunity to recognize both individual and collective accomplishments over the past year. The evening was a great reminder of how fortunate we are to be part of such a caring and committed team.
A highlight of the celebration was the wonderful dinner prepared by an incredibly talented individual, Chef Jeff Qualls. The evening concluded with the appearance of Santa Claus. The excitement that filled the room when Santa made his grand entrance was palpable. With a hearty “Ho, ho, ho!” Santa brought the spirit of giving and joy to everyone in our office. As we inch closer to bidding farewell to another year and ringing in 2025, we want to express our deepest gratitude to all of our clients and wish everyone a holiday season filled with joy and happiness and a year filled with peace and prosperity.
We look forward to continuing to be of service to you in the new year and beyond.
Sincerely,
All of us at Probity Advisors, Inc.
