December 11, 2024: Bad News Is Good News

Last week’s economic reports provided further evidence that the U.S. job market is slowing. Despite headline growth of 227,000 jobs in November, a higher unemployment rate and lengthening duration of unemployment suggest that job seekers are finding a less hospitable market. In addition, companies have slowed their rate of new hires to the lowest level in 10 years.

A slowing job market may not be welcome news for job seekers, but it was welcome news for bond and stock investors. Both markets rallied following the report’s release on increased confidence that the Federal Reserve—aiming to extend the economy’s expansion—will continue lowering interest rates at its meeting next week. In the hours following the report’s release the implied probability of another 0.25% interest-rate cut grew to 85%.

Lower rates benefit not only individual and corporate borrowers; lower rates also support stock prices by increasing the present value of future cash flows. Hopes of lower rates have helped propel the S&P 500 to over 50 all-time highs in 2024. Last week’s bad-news-is-good-news jobs report helped keep those hopes alive.

Weekly Market Update: December 11, 2024