US stocks rise on NFP data, Fed rate cut prospects

Today’s headlines

What’s happening: US stocks closed higher on Friday amid higher speculations of the Federal Reserve cutting interest rates in December.

What happened: All three major stock indices recorded gains on Friday as investors responded to the release of economic reports that were delayed due to the federal government shutdown.

However, the decline in US stocks earlier in the week resulted in the indices posting weekly losses amid concerns around elevated valuations of tech stocks.

Why it matters: Data released on Thursday showed that the US unemployment rate unexpectedly rose to 4.4% in September, from 4.3% in the previous month. Nonfarm payrolls (NFP) jumped by 119,000 in September. This followed a decline of 4,000 in August and was sharply higher than market estimates of 50,000.

Data released on Friday showed that the University of Michigan’s consumer sentiment index rose to 51.0 in November. This came higher than a preliminary reading of 50.3. The year-ahead inflation expectations, as compiled by the University of Michigan, eased to 4.5% in November from a preliminary reading of 4.7%.

US wholesale inventories were flat at around $908 billion in August, versus estimates of a 0.2% decline. The S&P Global composite PMI climbed to 54.8 in November, from 54.6 in the previous month and topped market projections of 54.5.

The data releases triggered higher speculations of an interest rate cut by the Fed next month. Comments from Fed policymakers were mixed, with New York Fed President John Williams saying the central bank could lower interest rates in the near term, while Dallas Fed President Lorie Logan stating that rates could be kept on hold.

Upbeat quarterly report from AI giants like Nvidia eased market concerns around lofty AI-related tech valuations. Shares of Intuit jumped 4% on Friday after the company reported better-than-expected results and issued strong sales guidance for the fiscal second quarter.

Communication services and healthcare stocks were among the top performers on Friday, both surging more than 2%.

The Dow Jones index rose 493.15 points, or 1.08%, to close at 46,245.41 on Friday, while the S&P 500 gained 0.98% to 6,602.99 and the Nasdaq 100 added 0.77% to settle at 24,239.57.

What to watch: Investors will continue monitoring comments from Fed officials regarding their monetary policy.

Data on the Dallas Fed Manufacturing Index (1930 UAE Time) will be released today. The Dallas Fed’s general business activity index for Texas manufacturing, which rose 4 points to a reading of -5.0 in October, is expected to improve further to -1 in November.

The markets today

The Canadian dollar in focus today ahead of manufacturing sales data

Context: The CAD/USD forex pair rose this morning as investors digested the latest economic reports.

Details: Data released on Friday showed new housing prices in Canada declined 0.4% in October, after a 0.2% decline in the previous month. This marked the eighth straight month of no growth.

Retail sales in Canada came in unchanged in October, compared to a 0.7% decline in September.

Meanwhile, the Indian government said that Canada and India had agreed to revive stalled talks for a fresh trade agreement, after talks had been paused due to a diplomatic spat. “The leaders agreed to begin negotiations on a high-ambition Comprehensive Economic Partnership Agreement (CEPA), aimed at doubling bilateral trade to USD 50 billion by 2030,” said a statement from the Indian Prime Minister’s Office.

Strength in the US dollar weighed on the CAD/USD pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged higher to 100.20 this morning.

Lower prices of crude oil, one of Canada’s major exports, also exerted pressure on the loonie. WTI crude oil prices fell around 0.2% to trade at $57.96 per barrel this morning.

The CAD/USD forex pair edged higher to 1.4098 this morning.

What to watch: Investors await the release of Canada’s manufacturing sales (1730 UAE Time) today. Canada’s manufacturing sales, which surged 3.3% to C$72.1 billion in September, are expected to decline by 1.5% in October.

Other Markets: European indices closed mixed on Friday, with the FTSE 100 and CAC 40 up by 0.13% and 0.02%, respectively, and the DAX 40 and STOXX Europe 600 Index down by 0.80% and 0.33%, respectively.

The news shaping the markets

US Secretary of State Marco Rubio said a “tremendous” amount of progress had been made during the talks in Geneva about ending the Russia-Ukraine war. The news sent the RUB/USD pair higher in forex trading this morning.

Italy’s sovereign rating was upgraded by Moody’s from “Baa3” to “Baa2”, lending support to the EUR/USD forex pair.

Peru’s economy grew by 3.4% year-over-year in the third quarter, following a 2.6% expansion in the previous quarter. This being the seventh straight year of growth sent the PEN/USD higher in forex trading this morning.

Mexico’s economic activity index grew by 0.7% year-over-year in September, following a 0.5% decline in August. The latest reading coming in slightly below market estimates of 0.8% exerted pressure on the MXN/USD forex pair.

China’s foreign direct investment declined by 10.3% to 621.93 billion yuan in the year to October, sending the CNY/USD pair lower in forex trading this morning.

What else to watch today

Germany’s Ifo business climate (1300 UAE Time), Ifo current conditions (1300 UAE Time) and Ifo expectations (1300 UAE Time), South Africa’s 182-day T-Bill auction (1330 UAE Time), 273-day T-Bill auction (1330 UAE Time), 364-day T-Bill auction (1330 UAE Time) and 91-day T-Bill auction (1330 UAE Time), Brazil’s FGV consumer confidence (1500 UAE Time), Mexico’s mid-month core inflation rate (1600 UAE Time), France’s 12-month BTF auction (1800 UAE Time), 3-month BTF auction (1800 UAE Time) and 6-month BTF auction (1800 UAE Time), as well as US 3-month Bill auction (2030 UAE Time), 6-month Bill auction (2030 UAE Time) and 2-year Note auction (2200 UAE Time).