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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Extend Their Winning Streak To 6 Weeks In A Row
Stocks finished higher on Friday with the Dow, S&P, and Nasdaq all making new YTD high closes.
And they all extended their winning streaks making it 6 up weeks in a row.
(The small-cap Russell 2000 and the mid-cap S&P 400 didn't make new YTD high closes like the others, but they too ended higher on Friday, and for the week, extending their winning streak to 4 weeks in a row.)
Friday's Employment Situation report came in a bit higher on the headline number, but right in line with expectations on the private sector. The headline number showed 199,000 new jobs were created in November (150,000 in the private sector and 49,000 in the public), vs. the consensus for 180,000 (150,000 in the private sector and 30,000 in the public).
The unemployment rate fell to 3.7% vs. last month's 3.9% and views for the same, while the participation rate rose to 62.8%, up from last month's 62.7%, but in line with the estimates.
And average hourly earnings were up 0.4% m/m vs. last month's pace of 0.2%, and expectations for 0.3%. On a y/y basis they came in at 4.0% vs. last month's revised 4.0% and the consensus for the same.
The biggest job gains came from the following industries: Health Care added 77,000 new jobs; Government employment rose by 49,000; Leisure & Hospitality was up 40,000 new jobs; Retail Trade hired 38,000; Manufacturing added 28,000; Social Assistance jobs gained 16,000; and Information Services were up 10,000 new jobs.
All in all, it was a slightly better report than expected. And while that pressured stocks at the open, and for a short time in the afternoon, the dips were short-lived and stocks ultimately climbed higher before setting new YTD records.
It was clear that the slightly better than expected report was not likely to change anyone's mind at the Fed about rates at Wednesday's FOMC announcement.
Stocks also got a boost seeing the Consumer Sentiment Index coming in at 69.4 vs. last month's 61.3 and views for 61.9. It was noted that there was a 'broad consensus of improved sentiment.' Moreover, year-ahead inflation expectations, which are also part of that report, fell to 3.1% vs. last month's 4.5% and estimates for 4.2%.
There's just 3 more weeks left in the year.
And the Q4 rally is going strong, and looking to add to its gains.
Inflation is on the downswing, sentiment is on the upswing, the economy continues to show strength, but not so much as to reignite inflation or needing more cooling. Interest rates are likely on the way down next year (although when and by how much remains to be seen). And it looks like the soft landing the Fed was hoping for could very well come to pass.
Let's also not forget that while year 3 of the 4-year Presidential Cycle (that's 2023), is the best of all four years, the 4th year (that's 2024) is typically the second best year. And that suggests the bull market will continue on.
So make sure you're taking full advantage of it.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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