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Stronger-Than-Expected Jobs Data May Weigh On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Friday, with stocks likely to move to the downside following the lackluster performance seen in the previous session.

The futures showed a significant move to the downside following the release of the Labor Department's closely watched monthly jobs report, which showed stronger than expected job growth in the month of November.

The report said non-farm payroll employment jumped by 263,000 jobs in November after surging by an upwardly revised 284,000 jobs in October.

Economists had expected employment to shoot up by 200,000 jobs compared to the addition of 261,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate held at 3.7 percent in November, unchanged from October and in line with economist estimates.

While the report points to continued strength in the labor market, the data may added to lingering uncertainty about the outlook for interest rates.

The Federal Reserve is likely to slow the pace of interest rate hikes as early as next month, but continued labor market tightness may still lead to the central bank to raise rates higher than currently anticipated.

After skyrocketing over the course of Wednesday's session, stocks turned in a relatively lackluster performance during trading on Thursday.

The Nasdaq and the S&P 500 spent the day bouncing back and forth across the unchanged line, while the narrower Dow gave back ground.

The major averages eventually ended the session mixed. While the Nasdaq crept up 14.45 points or 0.1 percent to 11,482.45, the Dow slid 194.76 points or 0.6 percent to 34,395.01 and the S&P 500 edged down 3.54 points or 0.1 percent to 4,076.57.

The pullback by the Dow came after the blue chip index ended Wednesday's trading at its best closing level in over seven months.

A steep drop by Salesforce (CRM) weighed on the Dow, with the business software company plunging by 8.3 percent after announcing Bret Taylor will step down as Vice Chair and Co-CEO, effective January 31, 2023.

The lack of direction shown by the broader markets came as traders looked ahead to the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 200,000 jobs in November after shooting up by 261,000 jobs in October, while the unemployment rate is expected to hold at 3.7 percent.

The data could affect the outlook for interest rates, although the impact may be somewhat muted following Federal Reserve Chair Jerome Powell's remarks on Wednesday hinting at a slowdown in the pace of rate hikes as soon as next month.

Traders were also digesting another slew of U.S. economic data, including a report from the Institute for Supply Management showing manufacturing activity contracted for the first time in over two years in the month of November.

The ISM said its manufacturing PMI slipped to 49.0 in November from 50.2 in October, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 49.8.

With the slightly bigger than expected decrease, the manufacturing PMI fell to its lowest level since hitting 43.5 in May of 2020.

Meanwhile, a separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended November 26th.

The report said initial jobless claims fell to 225,000, a decrease of 16,000 from the previous week's revised level of 241,000.

Economists had expected jobless claims to edge down to 235,000 from the 240,000 originally reported for the previous week.

The Commerce Department also released a report showing personal income climbed by 0.7 percent in October after rising by 0.4 percent in September. Economists had expected another 0.4 percent increase.

The report said personal spending also advanced by 0.8 percent in October after climbing by 0.6 percent in September. The increase matched economist estimates.

A reading on inflation said to be preferred by the Fed showed core consumer prices, which exclude food and energy prices, edged up by 0.2 percent in October after climbing by 0.5 percent in September. Economists had expected prices to rise by 0.3 percent.

The annual rate of core consumer price growth also slowed to 5.0 percent in October from 5.2 percent in September, coming in line with estimates.

Most of the major sectors showed only modest moves on the day, contributing to the lackluster performance by the broader markets.

Gold stocks showed a substantial move to the upside, however, driving the NYSE Arca Gold Bugs Index up by 3.6 percent to its best closing level in over five months. The rally by gold stocks came amid a sharp increase by the price of the precious metal.

Meanwhile, natural gas stocks saw considerable weakness on the day, dragging the NYSE Arca Natural Gas Index down by 1.8 percent.

The weakness in the sector came as the price of natural gas for January delivery slumped $0.192 to $6.738 per million BTUs.

Significant weakness was also visible among banking stocks, as reflected by the 1.3 percent loss posted by the KBW Bank Index.

Commodity, Currency Markets

Crude oil futures are inching up $0.05 to $81.27 a barrel after climbing $0.67 to $81.22 a barrel on Thursday. Meanwhile, after soaring $55.30 to $1,815.20 an ounce in the previous session, gold futures are falling $15.90 to $1,799.30 an ounce.

On the currency front, the U.S. dollar is trading at 135.82 yen versus the 135.33 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0441 compared to yesterday's $1.0520.

Asia

Asian stocks fell on Friday as optimism about slower Fed rate hikes faded and recession worries took center stage.

Investors awaited key U.S. employment data for November due later in the day that is expected to show a sizable slowdown in hiring.

Investors also fretted about China's zero-Covid policy and its impact on the global economy.

China's Shanghai Composite Index slipped 0.3 percent to 3,156.14 as cities across the country further unwound Covid-19 restrictions following mass protests against strict pandemic curbs. Hong Kong's Hang Seng Index slid 0.3 percent to 18,675.35.

Japanese shares tumbled to hit a three-week low as the yen strengthened amid steep declines in U.S. and European bond yields.

The Nikkei 225 Index tumbled 1.6 percent to 27,777.90, marking its lowest close since November 10, with technology stocks and automakers pacing the declines. The broader Topix closed 1.6 percent lower at 1,953.98.

Honda Motor, Nissan and Mitsubishi Motors lost 2-6 percent. Social media and online ad firm CyberAgent jumped 4 percent and HUB surged 7 percent after Japan secured a historic 2-1 win over Spain in the Group E match of the FIFA World Cup 2022.

Seoul stocks fell sharply to snap a three-day winning streak as traders booked some profits after recent gains. The Kospi slumped 1.8 percent to 2,434.33. Tech heavyweights Samsung Electronics and SK Hynix lost 3-4 percent.

Australian markets ended notably lower, with fears of a slowing housing market and weak U.S. manufacturing data released overnight denting sentiment.

The benchmark S&P/ASX 200 Index dropped 0.7 percent to 7,301.50, dragged down by financial and energy stocks. The broader All Ordinaries Index shed 0.7 percent to close at 7,503.50.

Gold miners outperformed after bullion prices jumped overnight on the back of a pullback in the dollar.

Europe

European stocks have moved to the downside on Friday after having hit a six-month high in the previous session on signs of easing COVID-19 curbs in China and expectations the U.S. Federal Reserve may temper its aggressive rate hikes.

While the French CAC 40 Index has slid by 0.7 percent, the German DAX Index and the U.K.'s FTSE 100 Index are both down by 0.6 percent.

BP Plc and Shell have moved lower after the release of troubling U.S. manufacturing data and amid uncertainty over the outcome of Sunday's OPEC+ meeting.

Meanwhile, Wizz Air Holdings has shown a strong move to the upside after reporting a 70 percent increase in passenger traffic figures for November.

In economic new, French industrial production declined for the second straight month in October, data published by the statistical office Insee showed.

Industrial production dropped 2.6 percent month-on-month in October following a revised 0.9 percent decrease in September.

U.S. Economic Reports

A closely watched report released by the Labor Department on Friday showed employment in the U.S. increased by more than expected in the month of November.

The report said non-farm payroll employment jumped by 263,000 jobs in November after surging by an upwardly revised 284,000 jobs in October.

Economists had expected employment to shoot up by 200,000 jobs compared to the addition of 261,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate held at 3.7 percent in November, unchanged from October and in line with economist estimates.

At 9:15 am ET, Richmond Federal Reserve President Thomas Barkin is scheduled to speak on Is a Labor Challenge Coming? before the 2022 Virginia Economic Summit and Forum on International Trade.

Chicago Federal Reserve President Charles Evans is due to speak before an event, Kaufman Center for Financial and Policy Studies: The Role & Effectiveness of Financial Regulation, at 10:15 am ET.

At 1 pm ET, Evans is scheduled to give welcome remarks before a hybrid 36th Annual Economic Outlook Symposium hosted by the Chicago Fed.

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