Market Review: December 6, 2024

Economic data from December 6, 2024, underscores the resilience of the U.S. economy, with robust job growth, steady wage gains, and a sharp increase in consumer credit. Nonfarm payrolls surged to 227K, significantly beating expectations, while private payrolls grew by 194K, signaling strong labor market momentum. Consumer credit expanded sharply, reflecting confidence in borrowing and spending. However, inflation expectations rose, and consumer sentiment remained cautious, pointing to underlying concerns about future economic conditions. Energy markets saw increased drilling activity, while speculative interest in gold and equities signaled diverging market dynamics.

Key Highlights:

Labor Market Data:

• Nonfarm payrolls rose by 227K, and private payrolls increased by 194K, both significantly exceeding expectations.
• Average Hourly Earnings (YoY) remained steady at 4.00%, while monthly growth matched expectations at 0.40%, reflecting stable wage inflation.
• The unemployment rate ticked up to 4.20%, and the U6 unemployment rate rose to 7.80%, highlighting some softness in broader labor market measures.
• Participation rate dipped to 62.50%, indicating a slight decline in labor force engagement.

Inflation and Consumer Sentiment:

• Michigan 1-Year Inflation Expectations rose to 2.90%, while 5-Year expectations held steady at 3.10%, signaling persistent inflationary concerns.
• Consumer sentiment improved slightly to 74, while expectations fell to 71.6, reflecting mixed consumer confidence.

Energy Markets:

• Baker Hughes Oil Rig Count increased to 482, and the total rig count rose to 589, signaling expanded U.S. energy production.

Consumer Credit (Oct):

• Consumer credit surged to $19.24B, well above expectations, reflecting robust borrowing and spending activity.

Speculative Positioning:

• Speculative interest in gold increased, signaling renewed safe-haven demand, while speculative positions in Nasdaq 100 and S&P 500 rose, indicating confidence in equities.

Impact Analysis:

• USD Impact:
  Strong job growth, robust consumer credit, and rising inflation expectations provide strong support for the USD, reflecting economic resilience and potential for tighter Fed policy. However, softer labor force participation and rising underemployment slightly temper the bullish outlook. Overall, the USD impact is bullish.

• Gold Impact:
  Gold faces mixed signals, with higher speculative interest and rising inflation expectations providing support, while strong job and credit data weigh on its safe-haven appeal. The overall gold outlook is neutral to slightly bullish.

• Equities Futures Impact:
  Equities futures are likely to react positively to strong payroll and consumer credit data, signaling robust economic activity. Rising inflation expectations and higher energy production support specific sectors like tech and energy, while weaker consumer expectations may weigh on consumer-sensitive sectors. The overall equities outlook is bullish.

Today’s data paints a picture of a U.S. economy with strong labor market fundamentals and increased consumer spending capacity, supported by robust job growth and rising credit activity. However, rising inflation expectations and cautious consumer sentiment highlight the need for vigilance. The balance between economic resilience and inflationary pressures will remain a key focus for markets, with the Fed’s next steps likely influenced by these dynamics.