It’s awfully difficult to put financial investors in a positive mood when the Federal Reserve is threatening to potentially continue raising interest rates throughout 2023. The last thing traders need now is a strong employment report, but that’s exactly what they got this morning. On the other hand, there is some bad news mixed in with the good news, which (oddly enough) was received positively by stock traders.
The Labor Department’s December nonfarm payrolls report indicated that the U.S. added 223,000 jobs during that month. That’s well above the 200,000 jobs that economists had anticipated.
In other words, the American jobs market isn’t cooling off as quickly as expected. Why would this be a problem? It’s because a hot jobs market could be perceived by the Federal Reserve as a sign that inflation will remain elevated.
That, in turn, could prompt the central bank to aggressively raise the federal funds rate, which affects the country’s interest rates generally. Thus, we have “good news for the economy is bad news for the stock market” scenario.
Stocks Jump after the Release of the Employment Data
Despite the hotter-than-expected nonfarm payrolls print, the major U.S. indices jolted upwards soon after the data was released. By 9:00 a.m. Eastern Time in premarket trading, the S&P 500 (SPX) was up 0.65%, the Dow Jones Industrial Average (DJIA) rose 0.68%, and Nasdaq 100 (NDX) gained 0.5% compared to yesterday’s closing prices.
Most likely, the Nasdaq 100 was weighed down by Tesla (NASDAQ: TSLA), which was down 6% to 7% because the automaker is cutting its vehicle prices in China. On the other hand, notable morning runners included more defensive names like Costco Wholesale (NASDAQ: COST), up nearly 3% in premarket trading, as well as Visa (NYSE: V), up 1.5%.
What put the market in such a positive mood? Reportedly, U.S. wages only grew 0.3% month-over-month in December, whereas economists had expected 0.4% wage growth. Somehow, stock traders were able to ignore the sizable increase in nonfarm payrolls and instead focus on slower-than-anticipated growth in workers’ wages.
Whether the day will end as optimistically as it began remains to be seen. Ultimately, it’s just more data for both the bulls and bears to add to their arsenals.
