As December begins, U.S. stocks are riding high, nearing record levels and capping off what has been a remarkable year for investors. Last week, during the holiday-shortened trading period, the Dow Jones Industrial Average (^DJI) surged over 2%, while the Nasdaq Composite (^IXIC) and the S&P 500 (^GSPC) gained more than 1%. Both the Dow and S&P 500 concluded November at unprecedented highs.
This week, attention turns to critical labor market data, highlighted by Friday’s November jobs report from the Bureau of Labor Statistics. Additional reports on job openings, private wage growth, and activity in manufacturing and services sectors will also be closely monitored. Investors will scrutinize this data to gauge the Federal Reserve’s next move on interest rates, set to be announced on December 18. Meanwhile, corporate earnings from notable companies like Salesforce (CRM), Okta (OKTA), and Lululemon (LULU) will keep the spotlight on individual stocks.
Labor Market in Focus
Expectations for Federal Reserve rate cuts have fluctuated recently. As of Friday, markets estimated a 66% likelihood of a rate cut at the Fed’s December meeting, according to the CME FedWatch Tool. However, beyond this, only two additional rate cuts are projected in 2025, reflecting concerns over inflation’s persistence.
The November jobs report, set for release Friday morning, will provide critical insights. Economists anticipate a rebound from October’s sluggish employment growth, which many attributed to hurricanes and labor strikes. Projections suggest 200,000 new jobs were added in November, up sharply from October’s modest 12,000. The unemployment rate is expected to tick up slightly to 4.2% from 4.1%.
Wells Fargo’s economics team predicts the data will reaffirm a gradual softening in labor market conditions, even as the unemployment rate edges higher. This dynamic will likely influence the Fed’s inflation-centric approach, leaving the case for aggressive rate cuts in 2025 less compelling.
Tech Earnings: A Mixed Bag
Wall Street strategists are largely optimistic about 2025, forecasting the S&P 500 to end the year between 6,400 and 7,000. Much of this optimism hinges on a broadening of market strength beyond the “Magnificent Seven” tech giants—Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA).
However, some analysts, like Barclays’ Venu Krishna, remain cautious, emphasizing that Big Tech continues to outperform earnings expectations. While a broader market rally is anticipated, positive earnings revisions for tech giants suggest their outsized influence on the S&P 500’s growth will persist.
December’s Historical Strength
The final month of the year often sees strong market performance, particularly following substantial gains earlier in the year. Historical data supports this trend; since 1985, the S&P 500 has risen in December nine out of ten times when entering the month with over 20% year-to-date gains. Carson Group’s Ryan Detrick highlights this “momentum effect,” suggesting more all-time highs could be in store before 2024 concludes.
What’s Ahead This Week
Monday: Key manufacturing data and earnings from Zscaler (ZS).
Tuesday: Job openings report and earnings from Salesforce (CRM) and Okta (OKTA).
Wednesday: ADP private payrolls and factory orders data, alongside earnings from American Eagle (AEO) and Chewy (CHWY).
Thursday: Initial jobless claims and earnings from Lululemon (LULU) and Kroger (KR).
Friday: November’s nonfarm payrolls report, unemployment rate, and average hourly earnings.
With December underway, all eyes are on the labor market and the Fed’s next moves, while investors remain optimistic for another banner year for U.S. stocks.
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