The stock market may have a wide range of reactions to Friday’s December jobs, depending on the exact number, according to Goldman Sachs. The pace of jobs added to the U.S. economy is widely expected to have slowed last month. Nonfarm payrolls may have increased by 155,000 in December, down from 227,000 in November, according to economists polled by Dow Jones. While job growth beyond 155,000 new positions would signal a resilient labor market and sturdy economy, the stock market may not like an upside surprise because of the likely upward pressure it would exert on Treasury yields, according to Goldman’ Sachs’ strategist for global banking and markets John Flood. “Too hot and rates will climb higher (which the stock market clearly doesn’t want) and too cold will quickly shift worries from rates to growth,” Flood said in a note to clients on Wednesday. The strategist said the sweet spot for stocks is between 100,000 to 125,000, which can result in a kneejerk rally in the S & P 500 in the range of between 0.5% to 1%. Conversely, if the payroll number comes in between 175,000 to 200,000, the S & P 500 could sell off by the same amounts. A 200,000 headline number might drive down the stock market benchmark at least 1%, Flood said. The December jobs report marks one of the last key pieces of data before the Federal Reserve’s next policy meeting at the end of this month. Markets are pricing in a 93% likelihood the Fed will keep rates steady — overnight fed funds currently stand stand between 4.25% and 4.50% — at the conclusion of the Jan. 28-29 meeting, the CME FedWatch Tool shows. For its part, Goldman’s economy team projects the U.S. added 125,000 jobs in December, while the jobless rate is expected to edge up to 4.3% from 4.2% in November.
Goldman’s view on Friday’s jobs report and how the stock market will react
Jan 9, 2025
