What’s driving markets

Stock-market bulls cheered Friday’s jobs report, which showed that the pace of job creation and wage growth cooled last month, contradicting labor-market data released earlier in the week.

The December nonfarm payrolls report showed 223,000 jobs were created in December, above expectations for 200,000 new jobs, though the pace of job creation slowed from 256,000 during November. Wages grew by just 0.3% in December, down from 0.4% a month earlier.

See: U.S. adds 223,000 jobs in December and jobless rate matches 55-year low of 3.5%

While stocks advanced in the wake of the data, it seems the labor market has continued to confound expectations for an imminent recession, market analysts said. While the pace of wage growth has slowed slightly, workers continued to command higher pay, even if wages have lagged headline inflation.

“This is not going to push the Fed off its agenda one iota,” said Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., in commentary about Friday’s data.

Numerous Fed officials have made clear that they want to see unemployment climb in order to help suppress inflation and engineer a return to the Fed’s 2% target. Senior Fed officials expect unemployment to rise by nearly a percentage point in 2023, according to projections released in December.

“The release was a win-win from the Fed’s perspective, as it signaled that wage inflation is moderating while job growth remains steady,” said Peter Essele, Head of Portfolio Management, Commonwealth Financial Network. “Coupled with the fact that headline inflation continues to move in the right direction, there’s a growing chance the Fed may be able to navigate a soft landing in the economy. If it meets its target, 2023 could be one of the best years for markets given the amount of negative investor sentiment currently weighing on prices.”

The S&P 500 index is down more than 19% from its 52-week high after the Fed raised interest rates by 4.25 percentage points in 2022 in an attempt to crush inflation that hit a four-decade high of 9.1% in June, according to the consumer-price index.

Jobs data released earlier in the week painted a picture of a labor market that had remained robust despite the Fed’s best efforts, and it’s not clear whether Friday’s data have meaningfully changed this perception, market strategists said.

JOLTS data released Tuesday showed more than 10 million jobs remained open. Analysts noted that the ADP private sector employment report released on Thursday was stronger than expected, which triggered a selloff in stocks.

Other economic data set for release in the U.S. on Friday include the ISM services sector index for December and factory orders for November, due at 10 a.m. A number of Fed speakers are expected, including Atlanta Fed President Raphael Bostic and Fed Gov Lisa Cook at 11:15 a.m.; Richmond Fed President Tom Barkin at 12:15 p.m.; and Kansas City Fed President Esther George at 1 p.m.

Single-stock movers

• Technology stocks may be under pressure on Friday after Samsung Electronics KR:005930 said quarterly profits fell to an eight year low as it saw weaker demand for chips and smartphones.

• Southwest Airlines Co. shares are worth watching after the airline warned Friday that it expects to report a surprise net loss for the fourth quarter after cancelling thousands of flights over the holidays.

• Tesla Inc. shares are sinking lower after the electric vehicle maker cut prices in China again.