Stock Analysis & Ideas

Jobs Data Weighs on Markets: What You Need to Know

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Good news is bad news, once again, as a hotter-than-anticipated nonfarm payrolls print puts negative pressure on multiple stock-market sectors. Now, investors must stay nimble and consider avoiding the pitfalls of a potentially more aggressive Federal Reserve.

What’s good for the economy, isn’t always good for the equities market. It’s a topsy-turvy world in which stock traders are looking for signs of a slowdown in U.S. hiring so that the Federal Reserve will have an excuse to pause its interest-rate hikes or even pivot to interest-rate cuts next year.

Even though Federal Reserve Chairman Jerome Powell’s speech from a few days ago was this week’s most impactful market event, this morning’s employment-data report was also significant. So, let’s see what the numbers indicate and how it could potentially affect your investments now.

Nonfarm Payrolls Print Comes in Hotter than Expected

At first glance, the Labor Department’s report for the month of November might not seem noteworthy. After all, the 3.7% unemployment rate was perfectly in-line with what economists had anticipated. Yet, there’s more to the story here. As it turns out, nonfarm payrolls in the U.S. increased by 263,000 during the month of November. That’s a lot higher than the 200,000 that economists had projected.

On top of that, average hourly earnings increased 0.6% year-over-year in November. Economists, meanwhile, had modeled an increase of 0.3%. In other words, a surprisingly high number of people are working and they’re getting paid more than the experts had anticipated.

In order to slow down its trajectory of interest-rate increases, the Federal Reserve wanted to see signs of a cooling economy, which would help to tamp down inflation. However, given the aforementioned labor data, stock traders feel that the central bank will be less inclined to pause or pivot in the near future.

These Stocks are Impacted the Most

All of the major stock-market indices are down, with the Nasdaq falling further than the S&P 500 and the Dow Jones Industrial Average. As of 11:00 a.m. Eastern time, the Nasdaq was down 1.3%.

Clearly, last year’s high flyers are at risk. The Nasdaq is dominated by 2021’s growth stocks, such as Tesla (NASDAQ: TSLA), Meta Platforms (NASDAQ: META), and Netflix (NASDAQ: NFLX). These stocks, which had elevated P/E ratios last year, are vulnerable as the Federal Reserve continues to tighten its monetary policy.

Also, chipmakers are feeling the heat today as shares of semiconductor manufacturers Intel (NASDAQ: INTC), Advanced Micro Devices (NASDAQ: AMD), and Micron (NASDAQ: MU) are falling fast. Historically, chipmakers have tended to be susceptible to changes in interest rates.

There really are no safe havens in this environment, as even the less tech-heavy Dow Jones Industrial Average is in the red today. Investors might consider less volatile stocks for the time being, such as Walmart (NYSE: WMT), which generally has all-weather appeal.


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