Wall Street rallies on Goldilocks jobs report as inflation data looms

Nasdaq and S&P 500 climb on rate cuts hopes

The S&P 500 and the Nasdaq 100 hit fresh record highs on Friday following a mixed non-farm payrolls jobs report, which increased expectations that the Federal Reserve (Fed) will cut interest rates at its December meeting. For the week, the Nasdaq 100 surged 3.3%, the S&P 500 gained 0.96%, and the Dow Jones lost 0.6%.

Impact of non-farm payrolls report

Total payrolls bounced back to 227,000 from a revised 36,000, reversing the previous month's strike and storm-related downturns. However, the household survey showed contrasting evidence as the unemployment rate rose to 4.2% and the participation rate fell to 62.5% from 62.6%. Without the drop in participation, the unemployment rate would have increased to at least 4.3%.

Fed's stance ahead of December meeting

Speaking on Friday before the Federal Open Market Committee's (FOMC) blackout period, Fed Governor Bowman stated that inflation is still 'uncomfortably' above target and prefers a careful approach to adjusting rates, pending November's inflation data. Cleveland Fed President Hammack noted the Fed is 'at or near' a point to slow rate cuts. Meanwhile, San Francisco Fed President Daly advocated for gradual easing.

This week's November consumer price index (CPI) report is the last key data release before the December FOMC meeting. Preview below.

What to expect from the November CPI report

Date: Thursday, 12 December at 12.30 am AEDT

Last October, the annual inflation rate in the United States (US) increased to 2.6% year-on-year (YoY), up from 2.4% in September, which was the lowest rate since February 2021 and in line with market expectations. The annual core consumer price inflation rate in the US, excluding items such as food and energy, stood at a three-month high of 3.3% in October 2024, unchanged from September and in line with market estimates.

For November, headline inflation is expected to rise to 2.7% YoY from 2.6%, while core inflation is expected to remain at 3.3% YoY. The US interest rate market is pricing in an 88% probability of a 25 basis point (bp) rate cut at the December FOMC meeting.

US annual core CPI rate chart

Nasdaq 100 technical analysis

Last week's breakthrough above the November 21,182 high reignited the uptrend in the Nasdaq 100 before hitting the next upside target of 21,500. Provided the Nasdaq 100 remains above short-term support at 21,000 and above the mid-November 20,315 low, a test of the next upside target of 22,000 is expected before encountering weekly trend channel resistance at approximately 22,300.

A sustained break below 21,000 and then below 20,315, would warn that a deeper decline is underway towards the 200-day moving average at 19,229, reinforced by trend line support around 19,000. Below this point, support is sparse until the August low of 17,453.

It is worth noting that bullish seasonality typically favours gains for US equities from mid-December into mid-January. Historically, the last two weeks of December rank as the third-best two-week period of the year, averaging a +0.99% return. The first two weeks of January are even more positive, boasting an average return of 1.61%. Combined, they form the most favourable four-week stretch of the year, with an average return of 2.6%.

Nasdaq 100 cash weekly chart

S&P 500 technical analysis

Last week, the S&P 500 secured its fourth week of gains in the five weeks since the US election. If it remains above short-term support at 6000 and above the mid-November 5853 low, the S&P 500 is expected to push towards weekly trend channel resistance at 6300 into year-end.

If the S&P 500 breaks below short-term support at 6000 and sees a sustained break below the mid-November 5853 low, it would indicate that a deeper pullback is underway, initially targeting horizontal support at 5670 - 5650. Below this level, the uptrend support at 5600, originating from the October 2023 4103 low, and the 200-day moving average at approximately 5480, is the next likely target.

S&P 500 cash weekly chart

• _{Source: TradingView. The figures stated are as of 9 December 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}