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U.S. job market is still very hot: what to expect from stocks next week?

By:
on Dec 2, 2022
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  • U.S. economy added way more than expected jobs in November.
  • Katie Stockton explained what it means for the equities market.
  • "VIX" or the CBOE Volatility Index slipped below 20 on Friday.

S&P 500 is in the red on Friday after the Bureau of Labour Statistics reported the U.S. economy to have added more than expected jobs in November.

Katie Stockton reacts to the economic data

Economists were expecting an increase of 200,000 in nonfarm payrolls. But the number came in sharply higher at 263,000 this morning, suggesting the aggressive rate hikes have so far failed to meaningfully slow the labour market.

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Unemployment rate stood at 3.7% last month – in line with expectations. Explaining what this data meant for the equities market, Katie Stockton of Fairlead Strategies said:

Equity market is pretty stress especially after Wednesday’s rally. We have these counter trend signals in equity market and also in the volatility index. So, there are some indications that we might have inflection.

The benchmark index is trading right at its 200-day Moving Average at writing.

CBOE Volatility Index suggests a sell-off ahead

For the month, the Commerce Department revealed an increase of 0.6% in average hourly earnings on Friday. That’s double versus the economists forecast.

“VIX” or the fear index now sits at under 20 – another indication of a sell-off ahead. On CNBC’s “Squawk Box”, Stockton added:

You’ve seen momentum shifts favouring increase in volatility which would be a market negative. We suspect that next week we’ll have these sell signals.

Earlier this week, Fed Chair Jerome Powell signalled smaller rate hikes ahead (read more). But today’s economic news reiterates something else that he said i-e terminal rate will have to be higher than previously indicated and rates will need to stay up for longer.