[New York Stock Exchange] Dow and S&P Fall on November Job Slowdown... Tesla Hits Record High, Oil Prices at Four-Year Low

Despite a Surprise Increase in November Employment,
Unemployment Rate Hits 4.6%, Highest in Over Four Years
Retail Sales Stagnant in October Amid Weakening Labor Market
International Oil Prices Fall on Possibility of Russia-Ukraine Ceasefir

The three major indices of the U.S. stock market closed mixed on December 16 (local time). Investor sentiment was weighed down as the November employment report confirmed a continued slowdown in the labor market. Tesla hit an all-time high, buoyed by its pilot robo-taxi service, while international oil prices fell to their lowest level in over four years since early 2021 on the possibility of peace talks between Ukraine and Russia.

A trader is working on the floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP

On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average fell by 302.3 points (0.62%) from the previous trading day to close at 48,114.26. The S&P 500 Index, focused on large-cap stocks, dropped by 16.25 points (0.24%) to 6,800.26, while the tech-heavy Nasdaq Index rose by 54.049 points (0.23%) to 23,111.462.

By stock, Tesla closed at $489.88 per share, up 3.07% from the previous day, setting a new all-time high. Tesla CEO Elon Musk announced that the company is piloting unmanned robo-taxis in Austin, Texas, which propelled the stock to rise more than 3% for a second consecutive day. Energy stocks weakened as international oil prices declined, with ExxonMobil and Chevron falling by 2.6% and 2.08%, respectively. Nvidia rose by 0.81%.

The decline in the Dow Jones and S&P 500 indices was attributed to the reconfirmed slowdown in the labor market. According to the November employment report released by the Bureau of Labor Statistics (BLS) under the U.S. Department of Labor, nonfarm payrolls increased by 64,000. This figure exceeded the market expectation of 45,000 compiled by Dow Jones. Compared to October, when nonfarm payrolls had decreased by 105,000 due to federal government workforce reductions, the trend has reversed to an increase.

The issue lies in the rising unemployment rate. Despite the increase in jobs, the unemployment rate rose to 4.6% in November, signaling a weakening labor market. This surpasses both the September figure (4.4%) and the market expectation (4.5%), marking the highest level in four years and two months since September 2021. The broader unemployment rate, which includes those who have given up job searching or are seeking part-time work for economic reasons, reached 8.7%, the highest since August 2021.

Heather Long, Chief Economist at Navy Federal Credit Union, expressed concern, stating, "The U.S. economy has entered an employment recession. Over the past six months, job growth has barely reached 100,000, and even this has been concentrated in the healthcare sector, which is always active due to an aging population."

The direction of the Federal Reserve's monetary policy also remains uncertain. The market expects that the December employment report, to be released in early January, will serve as a more important indicator for determining the policy direction at the Federal Open Market Committee (FOMC) meeting scheduled for January 28. Kevin O'Neill, Associate Portfolio Manager at Brandywine Global, commented, "This report shows enough signs of (economic) slowdown to justify previous rate cuts, but there is little evidence to support further substantial easing. With mixed signals coming from labor market indicators, the next inflation data, to be released at the start of the new year, is likely to become the main driver for the market."

As employment instability affects consumer sentiment, retail sales also appear to have entered a stagnation phase. According to the U.S. Census Bureau under the Department of Commerce, retail sales in October stood at $732.6 billion, unchanged from the previous month, falling short of Bloomberg's forecast of a 0.1% increase. Weak automobile and gasoline sales played a significant role. Employment instability, economic uncertainty, and high inflation have combined to make consumers more cautious about increasing their spending. The retail sales growth rate for September was also revised downward from 0.2% to 0.1%. However, some analysts note that consumption has not contracted, and it continues to play a buffering role for the economy.

Gina Bolvin, President of Bolvin Wealth Management Group, stated, "While job growth has been maintained, cracks are appearing, and although consumers are still hanging on, active spending is not happening. This gives the Fed more room to adjust its policy direction without panicking. Investors should focus on quality, dividends, and long-term themes rather than short-term volatility."

Investors are now focusing on the Consumer Price Index (CPI) for November, which will be released on December 18. Both headline CPI and core CPI are expected to rise by 3.1% year-on-year, a slight increase from September's 3.0%. This reflects a phase where labor market slowdown and high inflation are occurring simultaneously.

U.S. Treasury yields are on a downward trend. The 10-year Treasury yield, a global benchmark, stands at 4.14%, while the 2-year Treasury yield, which is sensitive to monetary policy, is at 3.48%, down by 3 basis points (1bp=0.01 percentage point) and 2 basis points, respectively, from the previous day.

International oil prices continued to weaken on the possibility of an end to the war in Ukraine, falling to their lowest levels in over four years. West Texas Intermediate (WTI) crude closed at $55.27 per barrel, down 2.7% from the previous trading day. At one point during the session, it fell to $54.98 per barrel, marking the lowest level in four years and ten months since February 2021. Brent crude, the global oil price benchmark, ended trading at $58.92 per barrel, down 2.7% from the previous day.