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07.12.2023 05:53 AM
Wall Street Alarm: How the Employment Report Affected the Market

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U.S. stock indices ended Wednesday lower, driven by the decline in shares of major companies and the energy sector, as well as worsening conditions in the oil and gas, technology, and financial sectors. These trends have reinforced the view that the Federal Reserve may lower interest rates at the beginning of next year due to a weakening labor market.

The ADP National Employment Report showed that in November, private sector jobs increased by 103,000, less than the expected figure of 130,000. This confirmed the trend of a weakening labor market following reports of job vacancy reductions in October.

Experts interpret the latest data as a sign that the Federal Reserve's interest rate hikes are beginning to impact the economy. Bill Mertz from U.S. Bank Wealth Management noted that the current changes align with the overall picture of slowing job growth, which is not yet a problem but could become a concern if this trend continues and leads to significant job cuts.

The decline in the value of energy company stocks put additional pressure on stock indices. Oil prices fell 4% due to an unexpectedly high increase in U.S. gasoline inventories, heightening concerns about fuel demand.

Of the eleven S&P 500 sector indices, eight showed a decline. The most significant decrease was observed in the energy sector (.SPNY), which fell 1.64%, followed by the information technology sector (.SPLRCT) with a decrease of 0.93%.

Among individual companies, shares of Nvidia (NVDA.O) fell by 2.3%. Significant decreases were also shown in shares of major companies like Microsoft (MSFT.O) and Amazon (AMZN.O), losing more than 1% of their value.

Despite the overall decline in the S&P 500 index, the number of advancing issues in this index (.AD.SPX) exceeded the number of declining ones by a ratio of 1.3 to one, indicating a certain balance in the market.

On Friday, a more detailed report on non-farm employment for November is expected, which will provide additional information about the state of the labor market and help assess current economic trends.

Investors are closely watching the actions of the Federal Reserve, expecting it to maintain interest rates at the level of the current meeting next week. There is also speculation that the Fed might start lowering rates as early as March, considering the current economic situation and labor market data.

Most analysts believe that the Federal Reserve (Fed) will leave interest rates unchanged at least until July, postponing the potential reduction of rates to a later date than previously assumed.

This optimism regarding rate cuts contributed to a nearly 9% rise in the S&P 500 (.SPX) in November. However, at this point, this index remains about 9% below its record high reached in December 2021.

The S&P 500 index showed a decline of 0.39%, closing at 4549.34 points. Despite the overall decrease, some components of the index demonstrated significant growth. Shares of Campbell Soup Company (NYSE:CPB) rose by 7.18%, reaching a price of $43.27. Shares of Carnival Corporation (NYSE:CCL) increased by 5.91%, closing at $17.48. Also, shares of Bath & Body Works Inc. (NYSE:BBWI) rose by 4.94%, ending the trading at $36.99.

The Nasdaq Composite Index (.IXIC) also showed a decrease, falling by 0.58% to 14,146.71. The Dow Jones Industrial Average (.DJI) decreased by 0.19%, reaching a level of 36,054.43. These figures reflect the current market state, investors' expectations, and reactions to economic news, including speculations about future actions of the Fed.

Among the components of the Dow Jones index, the leaders of growth at the end of the last trading were shares of Walgreens Boots Alliance Inc (NASDAQ:WBA), which rose by 0.87 points (4.24%), closing at $21.38. Shares of Boeing Co (NYSE:BA) also showed growth, increasing by 2.76 points (1.18%) and ending trading at $236.92. Shares of 3M Company (NYSE:MMM) rose by 1.14 points (1.12%), closing at $102.83.

The trading volume on American exchanges was above average: approximately 11.3 billion shares were sold, exceeding the average of 10.7 billion shares over the last 20 sessions.

Shares of Plug Power (PLUG.O) experienced a significant drop of 5.9% after Morgan Stanley downgraded the company, which produces hydrogen fuel cells, from 'equal-weight' to 'underweight'.

Also noted was a decrease in shares of tobacco giants Altria Group (MO.N) and Philip Morris International (PM.N) by 2.8% and 1.6% respectively. This followed the announcement by British American Tobacco (BATS.L) about a $31.5 billion loss due to the write-down of the value of some cigarette brands in the USA.

Campbell Soup (CPB.N) shares showed a significant increase of 7.1% after the company exceeded analysts' expectations for quarterly profits, thanks to price hikes for packaged lunches and snacks.

In the context of indexes, the S&P 500 reached 29 new highs and did not record any new lows. At the same time, Nasdaq registered 99 new highs and 93 new lows.

The CBOE Volatility Index, calculated based on S&P 500 options trading, rose slightly by 0.93%, reaching 12.97, indicating the current level of market uncertainty.

Gold futures for February delivery showed an increase of 0.38%, rising by 7.65, and reached the mark of $2,000 per troy ounce. This change reflects the current dynamics in the precious metals market.

In the energy sector, WTI crude oil futures for January delivery decreased by 4.29%, falling by 3.10, and reached $69.22 per barrel. There was also a decline in Brent crude futures for February delivery, which fell by 3.87%, losing 2.99, and settled at $74.21 per barrel. These changes indicate the current state and trends in the energy sector.

In the Forex currency market, the following changes are observed: the EUR/USD currency pair showed a slight change of 0.28%, reaching 1.08. USD/JPY quotes increased by 0.15%, to the level of 147.37, reflecting changes in currency exchange rates between the euro, the U.S. dollar, and the Japanese yen.

The U.S. dollar index (USD) futures also showed an increase, rising by 0.14% and reaching 104.14. This change indicates fluctuations in the value of the U.S. dollar relative to a basket of major currencies in the global market.

Thomas Frank,
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