Stocks tumble after better-than-expected jobs report

So much for the Federal Reserve pulling back on those aggressive rate hikes?

Investors are a little more nervous following a stronger-than-expected jobs report Friday. Wage growth remains robust as well. The market had been betting that the Fed would raise rates by just a half-point at its December meeting (following four straight three-quarter-point hikes) thanks to a cooling off in inflation.

Traders are still pricing in about a 70% chance of a half-point increase later this month. But that's down from odds of nearly 80% on Thursday.

Of course, this is not the only bit of data that the Fed (and market) will get to see before the next rate decision on December 14. Important reads on inflation (both the producer price index and consumer price index) will be released before the Fed meets again.

The US economy added 263,000 jobs in November, defying aggressive action from the Federal Reserve to cool the economy and bring down decades-high inflation.

The unemployment rate held steady at 3.7%, according to the latest monthly jobs snapshot from the Labor Department, released Friday morning.

Economists surveyed by Refinitiv had expected the pace of hiring to slow to a gain of only 200,000 jobs in October and the unemployment rate to stay flat at 3.7%.

Good news is bad news for investors. Stock market futures tumbled after the government reported that 263,000 jobs were added in November, more than expected. The better-than-forecast jobs gains could keep the Federal Reserve hiking interest rates more aggressively for longer. The unemployment rate held steady at 3.7% as well.

Dow futures were down more than 400 points following the jobs report while S&P 500 and Nasdaq futures sank 1.5% and 2.4% respectively.

US stock futures were down slightly Friday morning ahead of the big jobs report. Markets were jittery Thursday after the latest ISM Manufacturing Index showed a contraction in the sector for the first time since May 2020. Sentiment was also dragged lower by weak guidance from software giant and Dow component Salesforce. However, investors were cheered after a key measure of consumer prices slowed somewhat in Oct., a hopeful sign that inflation pressures could be moderating. Dow futures were down 334 points, or 0.1%. S&P 500 futures were also down 0,1% and Nasdaq Composite futures were 0.15% lower. 

Fear & Greed Index: 65 = Greed 

 Oil & gas: US oil remained flat at $81 a barrel. Average US gas prices fell to $3.45 a gallon. 

Ahead of Friday’s closely watched jobs report, economists polled by Refinitiv say they are expecting job growth to have slowed in November, with just 200,000 positions added.

But while the recent wave of layoffs hitting the tech sector has dominated news cycles and triggered concerns that a larger reckoning may be on the horizon, labor economists say those concerns are overblown.

“All these announcements that you hear: 10,000 [layoffs] here and 10,000 there, are basically a very, very small fraction of the total employment,” said Daniil Manaenkov, an economic forecaster at the University of Michigan.

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There are two main ways economists measure inflation in the US, and the Fed’s preferred metric, called the PCE, or Personal Consumption Expenditures price index (if you’re fancy about it,) is cooling off.

The PCE reading for October showed prices up 6% from a year ago. That’s down from 6.3% in September.

And if you take out the prices of food and energy, which tend to skew monthly readings because they’re so volatile, the index rose just 5% over the past 12 months.

(The other metric, the Consumer Price Index, tends to be the more commonly talked about one, but we’re not taking sides here. They’re both fine, and flawed, like most economic models. If you’re interested in the differences, you can read about them here).

The Fed should be pleased that its aggressive rate hikes in the past few months are having their desired effect, and they can ease up a bit. After four giant three-quarter-point hikes in a row, all signs point to Fed Chair Jay Powell announcing a half-point bump later this month.

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The crypto industry just can’t catch a break this year.

Binance, the world’s biggest cryptocurrency exchange, paused withdrawals and notified users of possible hacks of two crypto tokens Friday, according to a tweet by its founder and CEO Changpeng Zhao.

“Possible hacks on Ankr and Hay,” Zhao said on Twitter. “Initial analysis is developer private key was hacked, and the hacker updated the smart contract to a more malicious one.”

“Smart contract” is a term used to describe computer code that automatically executes all or parts of an agreement. It is usally stored on a blockchain-based platform.

In a separate tweet, Binance reassured its users by saying that “this is not an attack” against the company, and that its team is “engaged” with “relevant parties…to investigate further.”

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Inflation is cooling. Consumers are still spending. And hiring is slowing — but not collapsing. That’s why Moody’s Analytics chief economist Mark Zandi is increasingly confident that the American economy will — narrowly — escape a recession.

“It’s going to be a struggle. It’s going to feel uncomfortable. But I think we are going to thread the needle,” Zandi told CNN Business in a phone interview earlier this week.

Zandi, whose forecasts are often cited by the White House, pointed to recent economic and market indicators that suggest the economy is not falling off a cliff despite widespread fears of a recession.

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