Stocks closed out the first full trading week of December with a win on Friday as investors assessed the US monthly jobs report in a positive light, embracing the case that the Federal Reserve will start cutting interest rates next year. Stocks turned positive as market watchers saw more evidence of a soft landing for the economy.
The Dow Jones Industrial Average (^DJI) rose 0.3% or more than 100 points, while the S&P 500 (^GSPC) advanced 0.4%, notching a high for the year. The tech-heavy Nasdaq Composite (^IXIC) gained nearly 0.5%. It was the sixth straight week of gains for the major indexes.
The US unemployment rate fell unexpectedly to 3.7% in November, the nonfarm payrolls report showed, reflecting signs that the labor market may not be cooling as quickly as many had initially thought.
Meanwhile, the economy added 199,000 jobs, up from the previous month's reading, as striking auto workers and Hollywood actors came back to the workforce.
The report will serve as a test for stocks, which rallied as investors grew optimistic that the Fed's rate hikes have peaked and a "soft landing" for the US economy is in the cards. Hints of labor market cooling in earlier data this week were taken as a sign the Fed's inflation fight is paying off.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Elsewhere, the UK antitrust regulator said Friday it will examine OpenAI's partnership with Microsoft (MSFT) for a potential merger probe. The move comes after AI buzz boosted tech stocks on Thursday, with gains for Alphabet (GOOGL) and AMD (AMD) after they introduced products.
In commodities, oil prices bounced back but are still on course for the longest run of losses in five years as the market weighs whether extra OPEC+ cuts will fend off a global glut. West Texas Intermediate (CL=F) futures and Brent (BZ=F) crude futures were both more than 2% higher.
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Stocks close up as soft landing hopes set in
Wall Street pushed stocks higher Friday as investors embraced an optimistic reading of the robust jobs report, interpreting the figures as more evidence that the Fed will pull off a soft landing — pulling inflation down without triggering widespread job losses.
The Dow Jones Industrial Average (^DJI) rose 0.3% or more than 100 points, while the S&P 500 (^GSPC) advanced 0.4%, notching a high for the year. The tech-heavy Nasdaq Composite (^IXIC) gained nearly 0.5%.
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A look at the week ahead
The last Federal Reserve policy meeting is just days away.
Next week, market watchers and the broader public will get the Fed’s final word of 2023. While the central bank is widely expected to hold rates steady, the meeting holds importance for its guidance looking at and shaping the months ahead.
When do central bankers anticipate rate cuts to start? That question will be top of mind for many investors and consumers as Fed Chair Jerome Powell shares the latest on the quest for a soft landing.
Fresh inflation data will also arrive next week, helping to show if the Fed’s fight to tamp down on price pressures is still making progress.
Earnings reports from Costco, Oracle, and Adobe will also offer insight into the state of the economy and some of its corporate players.
Yahoo Finance's Brent Sanchez has a graphical breakdown of what to watch next week:
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Elon Musk's X is subtly hurting Tesla
Tesla, Elon Musk's nearly $800 billion electric vehicle company, has been humming along. The stock has doubled in value this year, even as Musk has invited controversy and an advertiser exodus over his actions and remarks tied to the platform X, formerly Twitter.
But broadly, Tesla faces a challenging mix of obstacles, from intensifying competition as legacy carmakers scramble for EV market share to uncertain EV demand and lingering concerns about charging infrastructure. Margins are declining. Regulators are also scrutinizing claims of self-driving capabilities and the range of electrified vehicles.
How, then, can a CEO effectively lead a company through such turbulence while spending significant mindshare on a separate, flailing business?
"What good is X doing Tesla?" said David Trainer, CEO of New Constructs, an investment research firm. "He hired a CEO to run it, and I see no downside to him 100% stepping away."
In fact, in Trainer's view, Tesla stock would probably surge if Musk were to announce he was leaving X.
Musk's financial entanglements also pose risks to Tesla shareholders.
"It’s hard to think of many CEOs who are the face of the company and the brand more so than Elon Musk is to Tesla," said Garrett Nelson, vice president and senior equity analyst at CFRA Research. "For example, if X advertising revenue were to drop significantly and Musk needed to sell more Tesla stock to provide funding to X, that would affect Tesla’s stock price," he said.
For now Wall Street is looking beyond Musk's X-related drama.
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Apple plans to expand India operations
The biggest name on Wall Street plans to ramp up its production in India, with a goal of producing a quarter of the world's iPhones in the country.
Within the next two to three years Apple and its suppliers are aiming to build more than 50 million iPhones annually in the world's most populous nation, according to a report from the Wall Street Journal.
The initiative comes as American multinationals attempt to diversify their supply chains away from China in the wake of severe COVID-19 disruptions in which the country took drastic steps to stop the spread of the outbreak. The measures were more restrictive and were in effect for much longer than public health restrictions in the US and other Western nations.
Apple's plans call for tens of millions of additional devices to be built in India following the initial expansion, according to the report. And by the end of the decade Indian production would account for an even greater share of global iPhone production. China, a crucial market and production hub for Apple, will remain the top producer of the iPhone.
In recent earnings calls Apple CEO Tim Cook has stressed the importance of the company's global expansion, particularly in India.
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Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday:
Paramount (PARA): Shares surged 14% on Friday after reports that private investment firm RedBird Capital, along with Skydance Media CEO David Ellison, were looking to acquire National Amusements' voting shares and take control of the media conglomerate. Paramount has long been discussed as an acquisition target as the entertainment industry and its streaming arms grow and consolidate and competition ramps up.
Warner Bros. Discovery (WBD): The entertainment giant is beefing up its content pipeline with a deal that will bring movies of the acclaimed indie film studio A24 to HBO and Max streaming. Shares rose more than 6% following the announcement of the multiyear pact.
Broadcom (AVGO): The chipmaker and infrastructure software provider advanced 0.4% after reporting fiscal Q4 results that beat Wall Street estimates. The company's executives said demand for generative AI-related tech is rising. Analysts at Bank of America reiterated a Buy rating on the stock.
Lululemon (LULU): The apparel company gained more than 5% Friday morning after initially losing steam following an earnings report Thursday that topped Wall Street estimates but fell short of fourth quarter revenue guidance. The reversal comes as more optimistic analysts say the company has shown consistency with no real signs of slowing down.
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Stocks hold on to gains but head for weekly loss
Wall Street clung to gains Friday afternoon but as investors digested a surprisingly strong jobs report, the uncertainty over the Fed's next policy move steered stocks towards a loss for December's first full week of trading.
The Dow Jones Industrial Average (^DJI) rose 0.1% or more than 30 points, while the S&P 500 (^GSPC) edged up 0.08%. The tech-heavy Nasdaq Composite (^IXIC) gained .08%
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UK antitrust regulator considers probe into Microsoft, OpenAI partnership
Antitrust regulators in Britain said they are considering a probe of the partnership between Microsoft and OpenAI.
The country’s Competition and Markets Authority said Friday they are reviewing whether the partnership constitutes a merger situation and are looking to speak with stakeholders about how the arrangement will impact competition.
The increased scrutiny comes after a dramatic leadership upheaval at OpenAI, in which the board ousted CEO and founder Sam Altman who was then quickly reinstated. Once the dust settled, Microsoft gained a non-voting position on the board. The tech giant has invested billions of dollars in the company and, in turn, has integrated OpenAI technology into an array of its services, leading Big Tech's scramble for market share in the nascent world of AI.
In a statement on X, formerly known as Twitter, Microsoft president Brad Smith said, "The only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI’s Board." He added that the company will work with antitrust regulators to provide them with the information.
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Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday:
Lululemon (LULU): The apparel company gained more than 3% Friday morning after initially losing steam following an earnings report Thursday that topped Wall Street estimates but fell short of fourth quarter revenue guidance. The reversal comes as more optimistic analysts say the company has shown consistency with no real signs of slowing down
Broadcom (AVGO): The chipmaker and infrastructure software provider advanced 0.5% after reporting fiscal Q4 results that beat Wall Street estimates. Executives said demand for generative AI. The company's executives said demand for generative AI-related tech is rising. And analysts at Bank of America reiterated a Buy rating on the stock.
RH (RH): Formerly known as Restoration Hardware, the luxury home-furnishing company fell more than 13% after missing analysts' expectations with revenue down 13.6% year over year.
Docusign (DOCU): Shares rose1.5% after the company posted earnings that surpasses expectations, with a revenue of $700.4 million, up 9% from a year earlier. The company also posted adjusted earnings of $0.79 per share versus analyst estimates of $0.63.
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Stocks cool as jobs report comes in hot
Wall Street pumped the breaks on the end-of-year rally following a hotter-than-expected jobs report that market watchers see as lessening the chances the Federal Reserve will cut interest rates in early 2024.
The Dow Jones Industrial Average (^DJI) fell 0.1%, while the S&P 500 (^GSPC) slid almost 0.2%. The tech-heavy Nasdaq Composite (^IXIC) declined by 0.4%.
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Fed rate bets are on the move
As expected, Friday's hotter-than-expected jobs report is already having an impact on how traders expect the Federal Reserve to behave in the year ahead.
Odds the Fed will cut rates in January dropped sharply early Friday — to 4% from 15% on Thursday, according to data from the CME Group.
Looking out to March, which is when many economists expect to see the Fed begin its rate cuts, the odds that rates are down 25 basis points from current levels have dropped to 45% from 55% yesterday. The odds that 50 basis points have been taken off the fed funds rate by March are down to 3% from 9% as of Thursday.
Next Tuesday's inflation numbers will be the next chance for these expectations to recalibrate, but the read-through from Friday's report is clear: The Fed has wanted to be patient and can likely remain so.
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