Stocks Soared On Friday, Closed Higher For The Week  Image: Bigstock Stocks closed sharply higher on Friday with all of the major indexes up by 2% or more. They also closed higher for the week. Friday's Employment Situation Report came in stronger than expected with 223,000 new jobs created in December (220K in the private sector and 3K in the public), vs. the consensus for 200,000 new jobs (175K in the private sector and 25K public). The unemployment rate came in better than expected as well, declining to 3.5% vs. last month's downwardly revised 3.6% and views for 3.7%. The participation rate also beat expectations at 62.3% vs. last month's 62.1 and views for 62.2%. Average hourly earnings grew by 0.3% m/m vs. expectations for 0.4%. Moreover, last month's 0.6% wage inflation was downwardly revised to 0.4%. On a y/y basis it was up 4.6%. That too was lower than the consensus for 5.0%. And last month was downwardly revised as well from 5.1% to 4.8%. Traders cheered the news. Not only does the threat of a recession seem far away given the strength of the labor market, but wage growth inflation, which the Fed has openly worried about, is starting to abate, much like the CPI, PPI, and PCE numbers. It would be incorrect to think the Fed will ease anytime soon. They already pretty much said that's off the table until 2024 at the earliest. But with inflation continuing to fall, there's hope that the Fed will not need to raise rates to the 5.1% level they previously alluded to, and maybe call it quits near the 4.5% range. Either way, with each report showing the economy holding up well, while inflation continues to decline, the greater the odds are of seeing a soft landing after all. TBD. Getting back to the jobs report, the industries with the biggest job gains came from Leisure and Hospitality with 67,000 new jobs (Food Services and Drinking Places led the way with 26K new jobs, and Gambling and Recreation came in a close second with 25K new jobs); Health Care increased by 55,000 jobs; Social Assistance added 20,000; employment in Other Services grew by 14,000; Retail Trade gained 9,000; Manufacturing gained 8,000; Transportation and Warehousing were up 5,000; and Mining added 4,000 new jobs. In other news, Factory Orders were down -1.8% vs. last month's 0.4% and views for -0.7%. And the ISM Services Index slipped to 49.5 from last month's 56.5 and estimates for 55.0. But Friday was all about the jobs (and wage inflation) report. And the market liked what it heard. With that, the first week of the year finished higher. Only 51 more weeks to go. And with plenty of positives in the economy right now, we may finally start seeing the market pay attention to them. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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