On Friday, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all gained more than 2% after the release of the December jobs report by the US Labor Department. The report showed that nonfarm payrolls in the US increased by 223,000 in December, while average earnings rose by 0.3%, which was lower than expected and less than the previous month’s 0.4% increase.
In another set of data, the Institute for Supply Management (ISM) showed that US services activity declined for the first time in more than two and a half years in December, due to weakening demand and signs of easing inflation.
The market rally on Friday was fueled by the belief that the Federal Reserve (Fed) may be nearing the end of its current tightening cycle and that it may not need to raise interest rates as much as previously thought, which would reduce the risk of a recession.
Megan Horneman, Chief Investment Officer at Verdence Capital Management, said that “it’s a kind of a win-win for the economy” and that the ISM services report being “really weak and broadly weak” is making people think that the Fed is nearing the end of its tightening cycle. John Augustine, Chief Investment Officer at Huntington National Bank, added that the reports on Friday “may alleviate that pressure to force a recession. They may already have slowed down the economy enough. They just need validation from inflation reports.”
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