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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Down On Friday And For the Week, Four Weeks Left To Go In 2021
Stocks fell on Friday after a disappointing jobs report. And it capped off a volatile week which saw all of the major indexes down for the second week in a row.
The Employment Situation report on Friday was expected to show 545,000 new jobs created in November (525K in the private sector and 20K in the public). Instead, we got 210,00 (235K private and -25,000 public). The good news was that we saw the unemployment rate tick down from 4.6% to 4.2%, beating the consensus of 4.5%. And the participation rate ticked up from 61.6% to 61.8%, beating the consensus of 61.7%.
Quite frankly, 210K new jobs is still good news. But it's quite a miss from the 545K that was expected, and the upwardly revised 546K from October.
The biggest job gains came from the following sectors and industries: Professional and Business Services added 90,000 new jobs; Transportation and Warehousing rose by 50,000; Construction gained 31,000; Manufacturing also increased by 31,000; and Financial Activities added 13,000 new jobs.
The biggest job losses were seen in Retail Trade which declined by -20,000 jobs. An interesting statistic given that the holiday shopping season is now upon us.
The other thing that weighed on stocks Friday were comments by St. Louis Fed President James Bullard. He actually said the "report seemed quite strong across the board," in spite of the "headline number." And he followed it up by calling it a "very tight labor market." But he also said that he'd like to see the Fed end their bond-buying by March (which is roughly 3 months faster than the June end date people have been expecting), and he'd like to see two interest rate hikes next year (also a more accelerated timeline than what the market has been expecting).
Granted, he's been vocally pushing for a faster taper pace and rate increase for a while now. So this wasn't exactly breaking news. Nonetheless, that definitely contributed to the selling pressure on Friday.
And, of course, you have the growing uncertainty surrounding the Omicron variant, where cases have now been reported in 5 states.
In spite of the aforementioned headwinds, and the jobs report disappointment, there's plenty of positives as well.
While there's literally only 4 weeks left before 2021 comes to a close, GDP growth is expected to accelerate into the end of the year. And that bodes well for the market, especially since December is typically a strong month for stocks (last few days notwithstanding). Then add in the forecasts for another year of robust growth in 2022, and it looks like there's a lot more upside to go.
But it does look like volatility is here to stay for a while. So heads up.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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