Global stocks advanced as investors raised their bets on the prospect of a U.S. interest rate cut this month after payrolls data showed strong job growth in November, while the euro dipped against the dollar as political turmoil gripped France.
Futures markets put an 85% chance on the U.S. Federal Reserve cutting rates by 25 basis points at its Dec. 17-18 meeting after the data, compared with 68% earlier in the session.
Nonfarm payrolls increased by 227,000 jobs last month after an upwardly revised 36,000 increase in October, in a month hit by hurricanes and strikes. Economists polled by Reuters had forecast payrolls accelerating by 200,000 jobs.
"Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling," said Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management.
"This print doesn't kill the holiday spirit and the Fed remains on track to deliver a cut in December," Rosner added in an email.
The S&P 500 and the Nasdaq rose on Friday, up 0.25% and 0.8% respectively, further bolstered by upbeat forecasts from Lululemon Athletica <LULU , Ulta Beauty ULTA.O> and other companies. The Dow was down slightly, with a 5% drop in UnitedHealth Group <UNH.N shares weighing on the index.
MSCI's gauge of stocks across the globe (.MIWD00000PUS) added about 0.2%.
Treasury yields dipped to a six-week low after the release of the payrolls data, with the yield on benchmark U.S. 10-year notes down 2.9 basis points to 4.153%, while the 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 4.8 basis points to 4.098%.
The U.S. dollar index ticked up 0.3% to $106.05 following the jobs report.
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European shares eked out gains on Friday, with French stocks logging their biggest daily rise in three weeks as investors factored in a potential budget despite ongoing political uncertainty, while also parsing an upbeat U.S. jobs report.
The pan-European STOXX 600 <.STOXX> was up 0.2%, logging its seventh consecutive day in advances and its strongest weekly performance in ten.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) reversed earlier losses to be up 0.2% thanks to a rally in Chinese shares, making up for investor caution around political turmoil in South Korea.
Chinese shares had climbed to three-week highs as investors scooped up technology shares ahead of a top-level policy meeting next week that will set the agenda and targets for China's economy next year.
The risk premium investors demand to hold French debt rather than German Bunds dropped to a two-week low on Friday, after President Emmanuel Macron said he would appoint a new prime minister soon to get a 2025 budget approved by parliament.
The euro had rallied on Thursday, on market relief that France had avoided a more volatile political outcome for now. The euro was last down about 0.23% at $1.056.
BITCOIN REVERSAL
Bitcoin , which hit the $100,000 mark for the first time on Thursday as investors bet on a friendly U.S. regulatory shift, initially ran into profit-taking, tumbling as far as $92,092. Prices then rebounded, last trading up 2.3% on the day around $101,300.
U.S. President-elect Donald Trump on Thursday said he was appointing former PayPal <PYPL.O> chief operating officer David Sacks as his "White House A.I. & Crypto Czar," another step towards overhauling U.S. blockchain-related policy.
"This spike in volatility over the last 24 hours has the hallmarks of a classic blow-off top," said Tony Sycamore, analyst at IG.
Oil prices fell around 1.5% and were headed for weekly losses as analysts projected a supply surplus next year on floundering demand despite an OPEC+ decision to delay output hikes and extend deep production cuts to the end of 2026.
Gold prices inched up on Friday to $2,632 an ounce.
A U.S. federal appeals court on Friday upheld a law requiring Chinese-based ByteDance to divest its popular short video app TikTok in the United States by early next year or face a ban.
The decision is a major win for the Justice Department and opponents of the Chinese-owned app and a devastating blow to TikTok parent ByteDance. It significantly raises the prospects of an unprecedented ban in just six weeks on a social media app used by 170 million Americans.
TikTok plans to appeal the decision to the Supreme Court.
In detailing their support of the law, the appeals court noted it was the result of Republicans and Democrats working together, as well as two presidents, as "part of a broader effort to counter a well-substantiated national security threat posed by the PRC (People's Republic of China)."
The Justice Department says under Chinese ownership, TikTok poses a threat because of its access to vast personal data of Americans, asserting China can covertly manipulate information that Americans consume via TikTok.
Attorney General Merrick Garland called the decision "an important step in blocking the Chinese government from weaponizing TikTok.”
But the Chinese Embassy in Washington called the law "a blatant act of commercial robbery" and warned the United States "must handle this case in a prudent manner to avoid harming the mutual trust between the two countries and the development of bilateral relations."
The ruling comes amid growing trade tensions between the world's two biggest economies after the administration of President Joe Biden placed new restrictions on China's chip industry and Beijing responded by imposing an outright ban on exports of gallium, germanium and antimony to the United States.
U.S. appeals court Judges Sri Srinivasan, Neomi Rao and Douglas Ginsburg rejected legal challenges brought by TikTok and users against the law, which gives ByteDance until Jan. 19 to sell or divest TikTok's U.S. assets or face a ban.
FREE SPEECH
"While today’s news is disappointing, rest assured we will continue the fight to protect free speech on our platform," TikTok CEO Shou Zi Chew said in an email to staff seen by Reuters.
Free speech advocates quickly criticized the ruling. The American Civil Liberties Union said, "Banning TikTok blatantly violates the First Amendment rights of millions of Americans who use this app to express themselves and communicate with people around the world."
A TikTok logo is displayed on a smartphone in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/File Photo Purchase Licensing Rights
In its analysis, the court said China, through its relationship with TikTok parent ByteDance, threatened to distort U.S. speech through TikTok and "manipulate public discourse."
China's "ability to do so is at odds with free speech fundamentals. Indeed, the First Amendment precludes a domestic government from exercising comparable control over a social media company in the United States."
The decision -- unless the Supreme Court reverses it -- puts TikTok's fate in the hands of first President Biden on whether to grant a 90-day extension of the Jan. 19 deadline to force a sale and then President-elect Donald Trump, who takes office on Jan. 20. But it's not clear whether ByteDance could meet the heavy burden to show it had made significant progress toward a divestiture needed to trigger the extension -- or if the Chinese government would approve any sale.
Trump, who unsuccessfully tried to ban TikTok during his first term in 2020, said before the November presidential election he would not allow the TikTok ban.
Friday's decision upholds the law giving the U.S. government sweeping powers to ban other foreign-owned apps that could raise concerns about collection of Americans' data -- and could open the door to a future crackdown on many other foreign owned apps. In 2020, Trump also tried to ban Tencent-owned WeChat, but was blocked by the courts.
TIKTOK BAN LOOMS
If banned, TikTok advertisers would seek new social media venues to buy ads. As a result, shares of Meta Platforms (META.O), which competes against TikTok in online ads, hit an intraday record high following the ruling and closed up 2.4%. Google parent Alphabet (GOOGL.O), whose YouTube video platform also competes with TikTok, closed up 1.25%.
The court opinion - which was written by Ginsburg, an appointee of President Ronald Reagan, and joined by Rao, who was named to the bench by Trump, and Srinivasan, an appointee of President Barack Obama - acknowledged its decision would lead to TikTok's ban on Jan. 19 without an extension from Biden.
ByteDance, backed by Sequoia Capital, Susquehanna International Group, KKR & Co (KKR.N), and General Atlantic, among others, was valued at $268 billion in December 2023 when it offered to buy back around $5 billion worth of shares from investors, Reuters reported then.
The law prohibits app stores like Apple (AAPL.O) and Alphabet's (GOOGL.O) Google from offering TikTok and bars internet hosting services from supporting TikTok unless ByteDance divests TikTok by the deadline.
Google declined comment while Apple did not respond to a request for comment.
In a concurring opinion, Srinivasan acknowledged the decision will have major impacts, noting "170 million Americans use TikTok to create and view all sorts of free expression and engage with one another and the world. And yet, in part precisely because of the platform’s expansive reach, Congress and multiple Presidents determined that divesting it from (China's) control is essential to protect our national security."
Walmart Inc (WMT.N), Amazon.com (AMZN.O) and fast-growing e-commerce sites Shein and PDD Holding's (PDD.O) Temu saw record-breaking sales on Black Friday and Cyber Monday, according to spending data, suggesting that they may finish the holiday season on a much stronger note than Target (TGT.N) and Best Buy (BBY.N), which struggled.
Holiday shoppers largely browsed at brick-and-mortar stores, making more online purchases at some retailers, snapping up such items as pre-owned Rolex watches, Pokemon cards and singer Sabrina Carpenter's perfumes at Walmart, and Fire TV streaming devices and Shark vacuums at Amazon during the deal-heavy week, which at Amazon began on Nov. 21, according to company statements.
Americans spent roughly $10.8 billion online on Black Friday this year, up 10.2% from the previous year, then followed that up by spending $13.3 billion on Cyber Monday, 7.3% more compared to Cyber Monday in 2023, according to Adobe.
Among major retailers, Amazon saw the strongest growth on Black Friday, with sales rising 6% compared to Black Friday a year earlier, according to data firm Facteus, which tracks online and in-store spending in the United States analyzing data from banks, credit unions, payment processors, and fintech companies. Its figures are not inflation adjusted.
Rival Walmart saw 3% more spending compared to the year-earlier period, while big-box chain Target and consumer electronics chain Best Buy saw declines versus a year earlier, Facteus said.
Among top performers on Black Friday, the day after Thanksgiving, were low-cost China rivals Temu and Shein, clocking double-digit percentage growth sales, albeit from a lower sales base, Facteus said.
Similarly, on Cyber Monday, the Monday following Thanksgiving, Amazon, Walmart, Temu and privately held Shein saw an increase in sales compared to Cyber Monday 2023, while Best Buy's declined versus a year earlier. Target saw a modest increase.
At Target, the muted sales performance came despite exclusive merchandise partnerships with singer Taylor Swift and the Broadway show turned Hollywood movie, "Wicked," which were expected to give it a boost.
According to research firm Circana, Target's exclusively available Taylor Swift "Eras Tour Book" sold 814,000 print units in just two days of launch, making it the second-highest adult non-fiction release behind Barack Obama's "A Promised Land."
At Best Buy, which has struggled due to shoppers pulling back on items like TVs and laptops, sales were 2% lower on Black Friday and 4% lower on Cyber Monday compared to the year-ago periods. Still, its shares are up 2% since Thanksgiving on Nov. 28, suggesting that investors expect a better performance ahead.
Since Black Friday, Walmart and Amazon's shares have rallied 4.5% and 9.3%, respectively, outpacing the S&P 500's (.SPX) rise of 1.6%.
Walmart offered four times as many deals between Black Friday and Cyber Monday on its Walmart.com marketplace, resulting in its highest single sales day ever between Nov. 25 and Dec. 2, the company said in a blog post.
While the retailer did not specify which day was its sales peak, it said top products included pre-owned Rolex watches, refurbished Dyson vacuums, Pokemon cards, vintage LEGO items, and beauty products from T3, BabylissPRO, Paul Mitchell, and Victoria's Secret. Singer Sabrina Carpenter's Sweet Tooth was the most coveted fragrance, it said.
Amazon said that the 12-day shopping period ending on Cyber Monday resulted in record sales compared to the same period in prior years, which Facteus confirmed.
Top sellers included Medicube devices, FireTV sticks, Samsung TVs, Barbie, Play-Doh, Shark vacuums and air purifiers. Shoppers bought a record number of items, generating its highest-ever sales during a 12-day period.
Temu generated $53.3 million in sales on Black Friday and $55.1 million on Cyber Monday, which were both records, Facteus said.
Temu told Reuters in an email that toys, especially kids' instruments and cameras, were popular.
Similarly, Shein, also hit new highs, with sales of $34.2 million on Black Friday and $38.9 million on Cyber Monday, the data firm said.
The head of the Federal Aviation Administration is working to streamline aircraft certification and strengthen oversight of Boeing (BA.N) in the aftermath of an in-flight emergency in January.
FAA Administrator Mike Whitaker said in an interview the agency is also restructuring how it approaches its broader aviation oversight after a door panel missing four key bolts flew off an Alaska Airlines (ALK.N) Boeing 737 MAX 9 in January.
Whitaker said he is reviewing the aircraft certification process.
"We're reviewing that to make sure we're getting the right stuff and we have the right tools to understand it, and maybe injecting ourselves earlier in the process to understand what's happening is going to be more effective," Whitaker said, adding the FAA is working to use "better technology" to help streamline the process.
At one point, Boeing hoped to get the MAX 7 certified in 2022 but has faced a series of issues. Boeing in January withdrew its request for a safety exemption to address an engine de-icing issue. Whitaker told Reuters he thought Boeing would submit a proposed de-icing fix as soon as this month.
Boeing declined to comment.
The MAX 7 must be certified before the FAA can certify the larger MAX 10. Delays have prompted airlines to push back delivery timetables. Alaska Airlines CEO Ben Minicucci told Reuters in September he does not expect to receive 737 MAX 10s until at least mid-2026.
The FAA has drastically boosted oversight of Boeing, moving away from being "too hands off" to more in-person inspections in what Whitaker calls a "permanent change."
"I think we've ramped up the level of oversight," he said. "The inspection points need to be focused on the key parts of that production process."
Whitaker revamped an agency committee on oversight to meet more often, and included more senior officials. The FAA is moving to "continuously review our oversight models" for Boeing, airlines, air traffic controllers, and others -- a new approach that "should give us a more agile oversight approach and prevent what may have been happening in the past."
Hiring bounced back in November from a weak showing in October (which had been depressed by temporary factors), reflecting an economy creating jobs at a healthy pace.
The US gained 227,000 jobs in November, according to the latest report from the Bureau of Labor Statistics. This followed a slightly upward-revised gain of 36,000 in October when job growth was depressed by two hurricanes and strike activity. Meanwhile, the unemployment rate ticked up to 4.2% from 4.1% in October.
“Nonfarm payrolls paint a picture of job growth which has settled at an equilibrium of moderate, healthy growth,” says Morningstar senior US economist Preston Caldwell.
Monthly Payroll Change
Even with the rebound in job growth, the Federal Reserve is seen as on track to cut interest rates at its next meeting, scheduled for Dec. 17 and 18. Bond traders are expecting the Fed to lower rates by a quarter point.
November Jobs Report Key Stats
- Total nonfarm payrolls grew by 227,000 versus an upward-revised 36,000 in October.
- The unemployment rate edged up to 4.2% from 4.1% in October.
- Average hourly wages climbed by 0.4% to $35.61 after rising 0.4% in October.
Caldwell points to the three-month growth rate in nonfarm payroll employment, which clocks in at a 1.5% annualized increase with the November data. He calls that “quite healthy.” He estimates that after adjustments are made for routine preliminary benchmark revisions (which won’t be incorporated into the official data until February), we’ll see a three-month growth rate of 1.2%, roughly in line with a 1.1% average growth rate since the second half of 2023.
No Recession Warning in Unemployment Data
The unemployment rate ticked up to 4.2% in November, a reading the BLS characterized as “little changed” from the 4.1% seen in October.
Unemployment Rate
Caldwell notes that the three-month average for the unemployment rate is 4.15%, up 0.4 percentage points from a year ago. The “Sahm rule” posits that the economy enters a recession whenever that metric rises by half a percentage point or more over a year. “The Sahm rule remains untriggered,” Caldwell observes.
No Signals of Inflation Pressures in Jobs Report
In addition, Caldwell sees good news on the inflation front. “Unemployment has increased by a cumulative 60 basis points, compared with the nadir in early 2023,” he says. “We believe the natural rate of unemployment is closer to 3.5%, which was also the level just before the pandemic—a period evincing little in the way of excess inflation or wage growth. As such, we think the labor market has developed a bit of slack, which should help push down wage growth further.”
In November, average hourly wages climbed by 13 cents, or 0.4%, to $35.61. Over the past 12 months, average hourly earnings have risen 4%.
Monthly Wage Growth
With the November jobs report, wage growth has risen slightly from the 3.8% year-over-year average in July to September. However, Caldwell notes that this pace is still well under the peak of 5.8% in early 2022. “The overall trend remains downward, as confirmed by various other wage growth measures, such as the employment cost index,” he says.
Fed Seen On Track to Cut Rates
Even with the rebound in job growth and recent inflation data showing that progress toward reducing price pressures has stalled, the central bank is still expected to lower the federal funds target rate from its current range of 4.50%-4.75% at its upcoming meeting.
According to the CME FedWatch tool, bond funds traders peg the chances of a quarter-point cut at roughly 87%, with about a 13% chance of the Fed leaving rates steady.
“Today’s data shouldn’t have a big impact on the Fed,” Caldwell says. “Much weaker data could have sealed the deal on a rate cut. But unless inflation shows an ugly upward surprise in next week’s [Consumer Price Index] release, we’d expect the Fed to cut in December.”