US Stocks Mixed Friday on Strong Data 12/02 16:10
Worries about inflation weighed on Wall Street Friday, leaving major indexes
mixed after a report showed wages for U.S. workers are accelerating, which is
good news for them but could feed into even higher inflation for the nation.
(AP) -- Worries about inflation weighed on Wall Street Friday, leaving major
indexes mixed after a report showed wages for U.S. workers are accelerating,
which is good news for them but could feed into even higher inflation for the
The S&P 500 ended 0.1% lower after having been down as much as 1.2% earlier
in the day. The Nasdaq composite also trimmed its deficit, falling 0.2%, while
the Dow Jones Industrial Average eked out a 0.1% gain. The indexes all notched
gains for the week.
Stocks had been on the upswing for the last month on hopes the worst of the
nation's high inflation may have passed already. That fed expectations for the
Federal Reserve to dial down the intensity of its big interest-rate hikes. Such
hikes aim to undercut inflation by slowing the economy and dragging down prices
for stocks and other investments.
But Friday's jobs report showed that wages for workers rose 5.1% last month
from a year earlier. That's an acceleration from October's 4.9% gain and easily
topped economists' expectations for a slowdown.
Such jumps in pay are helpful to workers struggling to keep up with soaring
prices for everyday necessities. The Federal Reserve's worry is that too-strong
gains could cause inflation to become further entrenched in the economy. That's
because wages make up a big part of costs for companies in services industries,
and they could end up raising their own prices further to cover higher wages
for their employees.
"Inflation is certainly moving in the right direction," said Adam Abbas,
co-head of fixed income at Harris Associates, "but the market is still going to
have to go through some calibration of the risk that we level off at 3% to 4%
core inflation versus a natural, steady move down to" the 2% goal set by the
"After such a strong move over the last three and a half weeks," Abbas said
about expectations for an easing up by the Fed, "maybe the market has gotten a
little ahead of itself."
Across the economy, employers added 263,000 jobs last month. That beat
economists' forecasts for 200,000, while the unemployment rate held steady at
3.7%. Many Americans also continue to stay entirely out of the jobs market,
with a larger percentage of people either not working or looking for work than
before the pandemic, which could increase the pressure on employers to raise
A jobs market that remains much stronger than expected could make an already
dicey situation for the Fed even more complicated. It's trying to slow the
economy just enough to prevent the buying activity that gives inflation its
oxygen, without going so far as to create a recession. The Fed has signaled it
will likely push the unemployment rate to at least 4.4% in its fight against
"The most important number for the Fed is probably the wage number," said
Brian Jacobsen, senior investment strategist at Allspring Global Investments.
Many traders are still betting on the Fed to downshift the size of its rate
hikes at its next meeting later this month, as several officials at the central
bank have hinted. Traders still largely expect the Fed to raise its key
overnight interest rate on Dec. 14 by half a percentage point, after hiking by
a heftier three-quarters of a point four straight times.
But expectations are rising for what the Fed will do in 2023. Treasury
yields jumped immediately after the jobs report's release on speculation the
Fed may ultimately hike rates higher than thought a few moments before.
The yield on the two-year Treasury rose to 4.29% from 4.24% late Thursday.
The 10-year yield, which helps set rates for mortgages and many other loans,
fell to 3.49% from 3.51%.
"Another month with a strong jobs report and torrid wage gains is a reality
check for where we stand in the inflation fight," said Mike Loewengart, head of
model portfolio construction at Morgan Stanley Global Investment Office.
The strong jobs data follows up on several mixed reports on the economy. The
nation's manufacturing activity shrank in November for the first time in 30
months, for example, while the housing industry is struggling under the weight
of much higher mortgage rates. Such data points had raised hopes the Fed's rate
hikes were taking effect and would ultimately pull down inflation.
Even though Friday's report showed hiring was stronger than expected, it
also clearly demonstrated that the nation's downward trend in hiring is
continuing. November's jobs gains matched the low seen in April 2021, which was
the weakest since December 2020 when the number of jobs shrank.
More economists are still forecasting the U.S. economy to fall into a
recession next year in large part because of higher interest rates.
"While the Fed won't back away from" a hike of just half a percentage point
"in December, they still have no clue what they'll do in 2023," said