This Morning’s Jobs Report Surpasses Predictions

Strong employment growth and lower unemployment reflect economic health

• The job market is beating expectations. Robust growth in employment and a lower unemployment rate are signaling indicate the Fed won’t reset interest rates anytime soon.
• Artificial intelligence is transforming the tech industry and consequently causing a surge in the markets.
• Apple is relocating iPhone production amid trade tensions, highlighting the company's adaptability.

Following a streak of five weeks, uncertainty looms over stocks aiming for a sixth consecutive gain. Despite the S&P 500's 0.8% climb and the Nasdaq Composite's 1.4% rise yesterday, the continuation of this winning streak remains unsure. The reliability of this trend hinges on today's job numbers, which have come in slightly stronger than anticipated.

Economists had expected this morning’s report would mention the creation of 190,000 jobs, holding the unemployment rate at 3.9%. However, the actual data revealed 199,000 new jobs and a dip in the unemployment rate to 3.7%. Although job gains for September and October saw slight downward revisions, this trend raises questions about whether the January report might also face downward revisions.

Considerations surrounding the latest job numbers tie back to last month's observation. The conclusion of auto worker and Hollywood strikes contributed to a resurgence in employment in November, possibly influencing the report's slight overperformance. Importantly, stagnant hourly earnings at 4.0% alleviate concerns about inflationary pressures. These figures are consistent with expectations for the upcoming Federal Open Market Committee meeting, indicating an unchanged interest rate outlook.

The AI Era?

Yesterday’s market activity mirrored this year's predominant theme, which centers around artificial intelligence (AI). Advanced Micro Devices (AMD) surged nearly 10% with news of its AI chip being adopted by Microsoft (MSFT), Meta (META) and Oracle (ORCL). Meanwhile, Alphabet (GOOGL), Google's parent company, soared 5% after unveiling its upcoming AI system. Nvidia (NVDA) also saw a 2.5% increase.

The year 2023 appears to be designated the era of AI. Whether this trend will persist into 2024 remains uncertain, but it potentially signals the inception of the next technological revolution. Concurrently, Bitcoin's resurgence to $44,000 from below $17,000 at the start of the year is noteworthy amid the crypto wave.

Around the markets

In other news, shares in Lululemon (LULU) dipped 2.5% post-earnings because of below-expectation guidance for the fourth quarter. Conversely, stock in Apple (AAPL) rose by over 1.5% this week following the announcement of shifting a significant portion of iPhone manufacturing to India. This move might shield the company from trade war turmoil with China.

Two additional focal points are the oil market and market volatility. After a recent decline below $70 per barrel, crude oil futures show a rebound in premarket trading, currently standing at $70.75. The Chicago Board Options Exchange's CBOE volatility index (VIX), a gauge of market volatility, closed just above 13 yesterday and has dropped farther in premarket trading, reflecting market confidence in the year's closing weeks.

As markets navigate these trends, maintaining investment strategies aligned with long-term objectives is advisable.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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