U.S. Non-Farm Payroll Kicks Off December Trading: Will the Bull Market Continue?

Updated December 2 , 2024

Source: freepik.com

U.S. Stock Markets Enter December on a High Note

As 2024 nears its conclusion, U.S. equities are trading close to record levels. During last week’s holiday-shortened trading session, the Dow Jones Industrial Average surged by more than 2%, while the Nasdaq Composite and S&P 500 each posted gains exceeding 1%.

These positive results capped off a strong November, with both the S&P 500 and Dow Jones closing the month at record highs. Investors are optimistic about carrying this momentum into the year’s final month, setting the stage for a potentially strong finish.

Labor Market Reports Take Center Stage

This week brings a slew of critical labor market updates, all culminating in the release of the November employment report from the U.S. Bureau of Labor Statistics on Friday. Widely regarded as the week’s most significant economic release, this report will offer insights into the state of U.S. job creation, wage trends, and unemployment.

In addition to the employment report, other important data points will be unveiled, including updates on job openings and wage growth in the private sector. Reports on activity in manufacturing and services will also provide a broader view of the U.S. economy’s health.

Investors will be paying close attention to these figures, as they are likely to influence the Federal Reserve’s upcoming interest rate decision on December 18. The direction of rates could hinge on whether this data supports the case for further economic tightening or loosening.

Uncertainty Surrounds Fed Rate Decisions

The Federal Reserve’s interest rate trajectory has been a key focus for investors, with market expectations shifting in recent months. Currently, CME’s FedWatch tool suggests a 66% chance of a rate cut during the Fed’s final meeting of the year. However, predictions of significant rate reductions in 2025 remain uncertain due to persistent inflationary pressures.

November’s employment report could play a pivotal role in shaping these expectations. Economists forecast a sharp rebound in job creation, with 200,000 new jobs expected—far exceeding the mere 12,000 reported in October.

This anticipated recovery is attributed to a normalization of conditions following disruptions caused by hurricanes and labor strikes in October. Despite the stronger job numbers, the unemployment rate is expected to rise slightly from 4.1% to 4.2%, reflecting a gradual cooling of the labor market.

Tech Stocks Continue to Drive Market Gains

Wall Street strategists are maintaining a positive outlook for 2025, with S&P 500 year-end targets ranging between 6,400 and 7,000. While some analysts are hopeful that the rally will expand to include value stocks and lesser-known names, the “Magnificent Seven” tech giants—Apple, Google, Microsoft, Amazon, Meta, Tesla, and NVIDIA—continue to dominate.

These tech leaders have consistently outperformed earnings expectations, making them critical drivers of the S&P 500’s overall growth. Research from DataTrek shows that in the past 30 days, most large-cap tech companies either maintained or raised their earnings forecasts, while non-tech companies experienced steeper downward revisions.

For now, the tech sector’s strong fundamentals remain a cornerstone of the broader market’s resilience and continued growth.

December Likely to Extend Stock Gains

December is shaping up to be another strong month for U.S. stocks, continuing a historical pattern. Ryan Detrick, Chief Market Strategist at Carson Group, highlighted that since 1985, when the S&P 500 entered December with gains exceeding 20%, the index rose further in nine out of ten cases.

This historical trend is bolstered by the market’s current fundamentals and strong corporate earnings, particularly from the tech sector. Combined with seasonal optimism and momentum, December appears set to add another chapter to 2024’s bullish market narrative.

As investors await the release of this week’s critical labor market data and upcoming earnings reports, confidence remains high that U.S. stocks will finish the year on a positive note.