Weekly Market Insights: Stocks Rise, Jobs Cool

Stocks ripped higher last week on a dramatic retreat in bond yields triggered by easing inflation and a slowing labor market.

The Dow Jones Industrial Average jumped 5.07%, while the Standard & Poor’s 500 surged 5.85%. The Nasdaq Composite index rocketed 6.61% higher for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.12%.^1,2,3

Stocks Rise

Stocks jumped higher right from the start of the week, shaking off the prior week’s sell-off. The combination on Wednesday of the Fed’s decision to keep rates unchanged, which accompanied dovish comments from Fed Chair Powell, and a reassuring Treasury announcement on future bond sales, sparked a third straight day of gains. Slight employment gains and weak manufacturing data provided an additional impetus.

The rally continued on Thursday following a sharp drop in bond yields that was driven, in part, by substantial productivity gains and decelerating wage growth. When Friday’s monthly employment report was lighter than forecast, yields pulled back further, and stocks added to their week’s gains.

Signs of Labor Cooling

Last week’s employment data showed potential for a cooling labor market after many months of confounding economists’ expectations. The first sign was a lower-than-expected growth in new private sector jobs in October, as reported by Automated Data Processing (ADP), which showed a gain of 113,000 new jobs versus a forecast of 130,000, while job openings were little changed.⁴

Initial and continuing jobless claims also rose, exceeding consensus estimates. On Friday, the government’s monthly employment report further confirmed a potentially cooling employment picture, showing an October slowdown in hiring (150,000 new jobs versus September’s revised gain of 297,000) and an uptick in the unemployment rate to 3.9%.⁵

Footnotes and Sources

^{The Wall Street Journal, November 3, 2023.}
^{The Wall Street Journal, November 3, 2023.}
^{The Wall Street Journal, November 3, 2023.}
^{CNBC, November 2, 2023.}
^{The Wall Street Journal, November 3, 2023.}