NEW YORK: The S&P 500 and the Nasdaq hit intraday record highs on Friday as traders increased bets on a Federal Reserve rate cut this month following robust November nonfarm payrolls data, while a drop in UnitedHealth shares weighed on the Dow.
US job growth surged in November after being severely hindered by hurricanes and strikes, but a rise in the unemployment rate to 4.2% pointed to an easing labor market, which should allow the Fed room to cut interest rates again this month.
“(The jobs data was) little bit hotter than the Goldilocks (situation) would probably like. However, it is sprinkling a little optimism that the Federal Reserve will cut rates in December,” said Ken Mahoney, CEO of Mahoney Asset Management.
“We would think after a cut in December, maybe pause for a couple of months.”
Traders boosted bets the US Federal Reserve would cut interest rates this month, now signaling a more than 90% chance of a 25-basis-point rate cut at the central bank’s Dec. 17-18 meeting, versus 67% before the jobs data was released.
Brokerages including Morgan Stanley are reiterating their expectation of a 25-basis-point interest rate cut by the Fed following the employment data.
Meanwhile, a preliminary reading of the University of Michigan’s US consumer sentiment survey stood at 74 in December, compared with an estimate of 73, according to economists polled by Reuters. At 11:34 a.m. ET, the Dow Jones Industrial Average fell 50.96 points, or 0.11%, to 44,714.75, the S&P 500 gained 15.76 points, or 0.26%, to 6,090.87, and the Nasdaq Composite rose 131.25 points, or 0.67%, to 19,831.97.
A 5.2% drop in UnitedHealth weighed on the blue-chip Dow.
Lululemon Athletica jumped 18% after the sportswear maker increased its full-year forecasts, while cosmetics retailer Ulta Beauty advanced 9.5% after raising its annual profit forecast, pushing the Consumer Discretionary sector up 1.5% to an all-time high.
Fed Governor Michelle Bowman said inflation risks to the economy remained and that augured caution with further decisions on rate cuts. Chicago Fed President Austan Goolsbee was noncommittal on whether he would support a reduction this month.
Federal Reserve policymakers will enter a media blackout that kicks in on Saturday, in the run-up to the central bank’s Dec. 17-18 policy meeting.
Accounting for the day’s moves, the S&P 500 and the Nasdaq were on track for their third consecutive weekly gains, while the blue-chip Dow was set for minor losses.
Wall Street’s three indexes have rallied this year, as investors bought into heavyweight tech stocks in a bid to cash in on the euphoria around artificial intelligence.
US President-elect Donald Trump’s win in the Nov. 5 election provided further impetus. Analysts expect his tax-cut policies and looser regulations will support corporate performance.
Advancing issues outnumbered decliners by a 1.06-to-1 ratio on the NYSE, and by a 1.56-to-1 ratio on the Nasdaq.
Source: Brecorder
