Stocks Closed Mixed Yesterday, Nasdaq And S&P 500, Once Again, Make New Record-High Closes Stocks closed mixed yesterday. The Dow, small-cap Russell 2000 and mid-cap S&P 400 were in the red. But the Nasdaq was up 0.40%, and made a new all-time high and close in the process. The S&P 500 was also up, eking out a 0.05% gain, and making a new all-time high close as well. Yesterday's Job Openings and Labor Turnover Survey report (or JOLTS for short) rose 5.05% to 7.744 million job openings vs. last month's 7.372M and views for 7.490M. Today we'll get another look at the labor market with the ADP Employment Report. Tomorrow we'll get two jobs reports: the Challenger Job-Cut Report and the Weekly Jobless Claims Report. But the jobs report everybody is really waiting for is Friday's Employment Situation Report by the Bureau of Labor Statistics (BLS). The Fed has a dual mandate of price stability (low inflation), and maximum employment. Even though progress on inflation has slowed recently, it's fallen considerably from its peak two years ago. But last month's weaker-than-expected BLS report, which actually showed private sector jobs falling by -28,000, risks ruining the soft landing the Fed has engineered up to this point. So any weakness in the jobs report will likely go a long way in keeping a December rate cut on the table. And while a hotter-than-expected jobs report might give a bit of pause to those expecting a rate cut later this month (12/18), I would assume it would be viewed favorably given last month's alarmingly weak jobs report, and the volatility of the last few reports. Either way, it's hard to imagine not getting another rate cut in December. We still have two more inflation reports to go (CPI and PPI) before the next Fed announcement. But assuming there's no drastic changes in either inflation or employment, there's plenty of reason to expect a rate cut two weeks from now. And that's because, if one were to assume that 100 basis points above inflation is the natural rate (aka the neutral rate), to allow for growth, but keep inflation in check (core PCE is currently at 2.8%), then bringing rates down to 3.8% is where things should be, which is 83 basis points below our current Fed Funds midpoint level of 4.63%. So even another 25 basis point cut in December would still mean interest rates are 58 bps too high. But the Fed insists they will remain data dependent. And that's why all eyes will be on Friday's (12/6) BLS report, not to mention next week's CPI report (12/10), and PPI report (12/11). In the meantime, today, aside from the ADP report, we'll get MBA Mortgage Applications, the PMI Composite report, the ISM Services Index, Factory Orders, and the Beige Book report. We'll also hear from Fed Chair Jerome Powell as he speaks and participates in a moderated discussion at the New York Times DealBook Summit in New York, NY. As I mentioned yesterday, stocks are in a good spot right now. And there's plenty of optimism for a strong year-end rally to cap off another spectacular year in the markets. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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