It was a wild ride for traders and investors last Friday, as Wall Street sparked a global rally in stocks following the release of a crucial U.S. jobs report. The report showed that wage growth slowed in December, leading to speculation that inflation may be easing and the Federal Reserve may not need to be as aggressive with interest rates as previously feared.
Here are the key takeaways from last Friday’s report:
👉 The U.S. economy added 223,000 jobs in December, a slight decrease from November’s pace of 263,000, but still above the 200,000 jobs forecast by economists.
👉 The unemployment rate dropped back to a pre-pandemic low of 3.5%.
👉 Average hourly earnings rose 4.6% in December from the previous year, down from 4.8% in November.
As a result of these figures, the S&P 500 jumped 2.3%, the Dow Jones Industrial Average climbed 2.1%, and the Nasdaq Composite surged 2.6%.
However, it’s important to note that last Friday’s report suggested that policy tightening may not be over yet. Despite the slowdown in wage growth, the data still showed a very resilient labor market, which could mean that the Federal Reserve may need to continue raising interest rates. In fact, Atlanta Fed President Raphael Bostic has stated that he expects the policy rate to reach the range just above 5.00% this year and stay there until “well” into 2024. This is in contrast to traders’ expectations for the policy rate, currently in the 4.25%-4.50% range, to top out at 4.75%-5.00% before the Fed begins cutting borrowing costs in the second half of this year.
In other market news, the U.S. services industry saw its first contraction in more than 2-1/2 years in December, although this didn’t seem to dampen investors’ spirits. The softer U.S. dollar, which fell 1.2% to 103.90 on the Dollar Index, helped boost the EUR/USD, which climbed 1.2% to 1.0644, and weighed on the USD/JPY, which fell 0.9% to 132.070.
Gold prices also received a boost from the weaker dollar, with spot gold jumping 1.8% to $1,864.94/oz. However, the energy market appeared to be the only major asset class that didn’t benefit from the overall market buoyancy, with Brent crude falling 0.2% to $78.57 per barrel and U.S. West Texas Intermediate crude futures remaining flat at $73.77.
In the cryptocurrency market, Bitcoin remained in the narrow range of either side of $17,000, where it has mostly lingered since the end of November 2020. The price of Bitcoin slumped 64% last year, its second-worst annual performance in its 14-year history, leading to a decrease in retail investor interest and a drop in trading volumes. It remains to be seen when institutions will regain confidence in the asset class.
Our market updates are brought to you by Daniel Ang, a veteran commodity trader with over 35 years of experience in the industry. Daniel’s career began in 1985 when he accompanied a classmate to a job interview and subsequently entered the field. He has since worked as a gold dealer and futures trader at Standard Chartered Bank, as well as founded Traders Academy International. Tune in for more valuable insights from Daniel and the rest of our team. Happy trading!
