The Week Ahead

Jobs report

• The most significant event on the horizon is the release of the November jobs report on Friday.

• This report will provide crucial insights into the labor market, which could influence the Federal Reserve's upcoming interest rate decisions.

• Economists expect the U.S. economy to have added 177,000 jobs in November, a substantial increase from October's 12,000 jobs.

• The unemployment rate is projected to rise slightly to 4.2%.

Federal Reserve Watch

• Investors are closely monitoring the Federal Reserve's stance on interest rates.

• Currently, there's a 66% probability of a quarter-point rate cut at the December 17-18 meeting, according to the CME FedWatch Tool.¹ 

• This expectation has been bolstered by recent inflation and GDP reports, rekindling hopes for a rate decrease.

Market Performance

• The S&P 500 is poised to potentially make history, having already gained 26% this year.

• A typical December increase could position 2024 among the most successful years on record.

• Historically, December has been the strongest month for the S&P 500, with an average gain of 1.6% since 1945.

Earnings Reports

• Several major companies are scheduled to release their earnings reports next week, including, Salesforce (CRM), Dollar General(DG) and Dollar Tree (DLTR)

• These reports could provide insights into consumer spending patterns and the overall health of the retail sector.

Notable Narratives

Sector Rotation

There's been a notable shift in stock leadership from Big Tech to cyclical and defensive sectors.

Areas such as utilities, real estate, industrials, and financials have seen increased interest.

This broadening of the market rally could continue into December.

Small-Cap Performance

The Russell 2000 Index, representing small-cap stocks, has shown significant momentum, rising nearly 9% in Q3 and over 12% year-to-date through September.

This trend could persist if economic optimism continues to grow.

Read on for deep dives into earnings and the jobs report.

Upcoming earnings

These earnings reports will provide valuable insights into various sectors of the economy, including technology, retail, consumer goods, finance, and healthcare. Investors and analysts will be closely watching these announcements for indications of company performance and future outlook.

Job Report Scenario Deep Dive

The upcoming jobs report, set to be released on Friday, December 6, 2024, is expected to have a significant impact on the market next week.

Market Sensitivity

The stock market is highly sensitive to the unemployment report, as it provides crucial insights into the economy's health.

Investors will be closely watching the following key metrics:

• Number of jobs added

• Unemployment rate

• Wage growth

Current Expectations

• Economists expect the U.S. economy to have added 177,000 jobs in November, a substantial increase from October's 12,000 jobs.

• The unemployment rate is projected to rise slightly to 4.2%.

If the jobs report shows stronger-than-anticipated growth:

• It may raise questions about the extent and frequency of future rate reductions by the Federal Reserve.

• Stock prices could potentially rise, especially in cyclical and growth-oriented sectors.

• Bond prices might decline as investors anticipate the Fed maintaining or increasing rates to control inflation.

If the jobs report is weaker than expected:

• It could signal a potential economic downturn.

• The stock market might react negatively, particularly affecting cyclical and growth-oriented sector ETFs.

• Bond prices could rise as investors anticipate earlier or more substantial rate cuts from the Fed.

Market Implications

1.  Fed Policy: The jobs report will influence expectations for the Federal Reserve's upcoming meeting on December 17-18. Currently, there's a 66% probability of a quarter-point rate cut at this meeting.¹

2. Sector Performance: Depending on the report's outcome, we may see shifts in sector leadership. Recently, there's been a notable move from Big Tech to cyclical and defensive sectors.

3. Market Rally: With the S&P 500 already up 26% this year, a typical December increase could position 2024 among the most successful years on record.

4. Volatility: While December is historically known for minimal volatility, an unexpected jobs report could lead to increased market fluctuations.

It's important to note that the market's immediate reaction to Friday's report might be tempered, as investors await additional labor and inflation data before the Fed's November meeting.

Nonetheless, the jobs report will play a crucial role in shaping market sentiment and expectations for the coming weeks.

Links

1. FedWatch CME Rate Cut Probability

Disclosures: All content provided by The Leverage Club is for informational and educational purposes only and should not be taken as trading or investment recommendations.

This product uses the FRED® API but is not endorsed or certified by the Federal Reserve Bank of St. Louis.