Strong Payrolls Data, Rising Wages Drag Equities Mostly Lower

Last Updated: Friday, December 2, 2022 4:31 PM | MT Newswires

US benchmark indices closed mostly lower on Friday after nonfarm payrolls surpassed estimates for November and wages grew twice as fast as projected, underscoring the Federal Reserve's concerns about price pressures even as it prepares to taper the pace of monetary tightening.

The Nasdaq Composite fell 0.2% to 11,461.50, while the S&P 500 lost 0.1% to 4,071.70. The Dow Jones Industrial Average edged 0.1% higher to 34,429.9. Energy led the decliners among sectors, followed by technology, and utilities, while materials and industrials logged the biggest gains.

For the week, the Nasdaq rose 2.1%, the S&P 500 moved up 1.1%, and the Dow increased 0.24%.

Nonfarm employment increased by 263,000 following an upwardly revised 284,000 gain in October, the Bureau of Labor Statistics said. The consensus on Econoday was for a 200,000 rise, with growth estimates ranging from 150,000 to 275,000. Monthly average hourly earnings grew 0.6%, double the consensus view, while annual wage growth came in at 5.1%, higher than a 4.6% increase anticipated by analysts.

It is harder to argue the trend in wage growth is slowing, Pantheon Macroeconomics said in a note. "The trend rate of increase seems to be about stable but we had been hoping to see a clear softening," Chief Economist Ian Shepherdson said.

"Even if inflation drops faster than expected over the next few months as a result of margin compression, (policymakers) will be worried about a rebound in the second half of 2023 and beyond if wage growth does not slow," he added.

Fed Chair Jerome Powell said Wednesday that the labor market is showing "only tentative signs of rebalancing," while wage growth remains "well above" levels that would be consistent with the central bank's 2% inflation target. The Fed, which has been raising interest rates since March, could start slowing the pace as soon as this month even though inflation continues to be "far too high," Powell said.

The US 10-year yield fell 4.3 basis points to 3.48%, and the two-year rate rose 1.6 basis points to 4.27%.

West Texas Intermediate crude-oil futures slipped 1.3% to $80.14 per barrel. A meeting between the Organization of the Petroleum Exporting Countries and its allies is scheduled for Sunday to set production quotas, with no clear consensus on whether the cartel will stick with its November decision to cut oil output by two million barrels per day or introduce more cuts.

In company news, Zscaler (ZS) set out a conservative guidance for billings growth because of longer sales cycles, sending the stock nearly 11% lower even as the cloud security company raised its revenue and earnings projections for the fiscal year. Shares were the worst performers on the Nasdaq.

EQT (EQT) said the US Federal Trade Commission has asked for additional information on the company's proposed $5.2 billion acquisition of THQ Appalachia I and related assets. Shares fell 3.8%, among the worst performers on the S&P.

Gold declined 0.2% to $1,812 per troy ounce, and silver increased 2.3% to $23.37 per ounce.

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