Markets React To Latest Jobs Report

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U.S. stocks on Friday were on track to end a volatile trading session lower. For the week, all three major indices were set to post solid losses, as market participants remained cautious ahead of the Federal Reserve’s policy meeting on Wednesday.

The major averages opened Friday’s trading session in the red after hotter than expected producer price inflation data, but had since pushed higher through the morning. However, gains have remained capped and stocks have struggled for traction.

With less than an hour of trading left, the tech-heavy Nasdaq Composite (COMP.IND) was down 0.09% to 11,072.28 points. The benchmark S&P 500 (SP500) had slipped 0.18% to 3,956.55 points. The blue-chip Dow (DJI) retreated 0.35% to 33,662.55 points.

Of the 11 S&P sectors, seven were trading in the red, with Energy and Health Care falling the most. Communication Services and Real Estate were the top gainers.

The November producer price index came in at +0.3%, which was above the forecasted +0.2% figure. Moreover, the core producer price index was also higher than expected at +0.4%.

Pantheon Macroeconomics highlighted that “margin inflation is trending down, and has a long way to go.”

“Our PPI projections suggest that core PCE inflation is likely to fall much faster than the Fed expects. Policymakers will wait to see the downshift in consumer inflation, rather than responding immediately to the message from the PPI, but they likely won’t have to wait long.”

On the other hand, economic data in the form of the University of Michigan’s consumer sentiment reading showed a better-than-expected rise for December. Furthermore, short-term inflation expectations improved.

“Varying economic conditions have left consumers dazed and confused. Despite expecting joblessness to rise, consumers also expect income to go up; even as the Fed raises rates, consumers expect rates to go down. Short-term inflation expectations fell, longer-term did not,” Wells Fargo economist Tim Quinlan said.

“In combination with this morning’s somewhat hotter-than-expected PPI report, there is little in today’s data to give policymakers at the Federal Reserve good reason to hold off on raising the fed funds rate another 50 bps at its meeting this coming Wednesday,” Quinlan added.

Turning to the bond markets, Treasury yields had gained. The 10-year Treasury yield (US10Y) was up 8 basis points to 3.57%, while the 2-year yield (US2Y) was up 2 basis points to 4.33%.

Among active movers, Arcellx (ACLX) was among the top movers on the Nasdaq Composite after signing a collaboration deal with Gilead’s (GILD) Kite. Autolus Therapeutics (AUTL) was the top Nasdaq loser, after pricing a stock offering.

Broadcom (AVGO) advanced as investors cheered its quarterly performance.

In an outsized move, Ambrx Biopharma (AMAM) shares gained more than seven-fold on results from a mid-stage trial.

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