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The S&P 500 headed for a slight weekly decline as a 5-week comeback in the benchmark took a breather despite economic data that backed hopes for an economic soft landing.
The Dow Jones Industrial Average gained 89 points, or 0.3%. The S&P 500 added 0.2%, after earlier hitting a high of the session of 4,606.31 that put it within a point of its 2023 peak. The Nasdaq Composite rose 0.3%.
November’s nonfarm payrolls report showed an unexpected drop in the unemployment rate. The jobless rate fell to 3.7% in November from 3.9% the prior month. It was expected to remain the same. The economy added 199,000 jobs, slightly ahead of the 190,000 estimate from Dow Jones and well ahead the 150,000 jobs added in October.
The data first raised concerns the economy was running too hot for inflation to cool enough for the Fed to start retreating from its high-rates policy. Some traders expect the Fed to start cutting rates as early as March, with its next policy meeting set for Wednesday.
On the other hand, the monthly jobs report could also support the notion that the Fed is guiding the U.S. economy toward a soft landing — a steady economic recovery amid falling inflation. Average hourly earnings, seen as a leading indicator of inflation, rose about as expected in November as the economy added more jobs than the prior month.
Meanwhile, a closely watched University of Michigan survey showed inflation expectations drop and consumer sentiment jump in December to it highest level since July.
These data points all help support the thesis that the Fed is likely done with its rate hiking cycle and that the economy may get the desired soft landing, said Mona Mahajan, Edward Jones senior investment strategist.
“We’re getting a slowdown in unemployment, but nothing that looks recessionary,” she said. It’s “also helpful that we can get labor supply and demand in better balance, inflation coming down without seeing a major tick up … in the unemployment rate. All that is positive for sentiment.”
For the week, the Nasdaq’s gained 0.4%, while the S&P is down 0.1%. The Dow is on pace for a 0.2% weekly loss.
In other news, Paramount Global shares surged nearly 14% on reports that Skydance and RedBird Capital were pursuing a takeover of National Amusement, which owns the majority of the media giant’s voting shares. Carrier Global shares jumped more than 5% on news that it’s selling a business unit to Honeywell. The industrial stock lost 2%.
Correction: A previous version misstated the S&P 500’s week-to-date performance.
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