Pushing higher. U.S. stocks are higher, and appear poised for a third straight day of gains as investors continue to take news out of the Middle East in stride. The S&P 500 Index notched its second record high of the year yesterday, extending its rally over the past three months to 13%. Investors should be prepared for volatility, though, with stocks at records and heightened geopolitical tensions. The strong rally to end the year may have pulled some 2020 stock market gains forward into 2019, perhaps limiting the upside for 2020.
Cyclical stocks continue to lead. Cyclical sectors have outperformed recently in a positive development for the durability of the market. Financials and technology stocks have both climbed more than 15% in the past 3 months, while defensive sectors, such as real estate and utilities, have barely moved. We’re encouraged by cyclicals’ leadership in this latest move up, as it signals confidence in the economic outlook. On a pullback, we see technical support for the S&P 500 near 3030, about 7% below Thursday’s close.
Hiring momentum slows. U.S. companies’ hiring momentum slowed in December. Nonfarm payrolls rose by 145,000 in December, below consensus estimates for a 160,000 gain. Manufacturing payrolls slid by 12,000, their biggest drop since August 2016 as the sector struggled with soft global demand and lingering U.S.-China trade tensions. Calendar quirks related to the late Thanksgiving may have also played some role in the shortfall. Average hourly earnings rose 2.9% year-over-year, the slowest pace in 17 months. Today on the LPL Research blog, we’ll dig more into the December jobs report, and highlight the job market’s role in a solid decade for the economy.
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