Jobs Data and Big Tech Earnings: What's in Store for Investors This December

December starts off with a critical week for financial markets, with investors bracing for major jobs data and earnings reports. The November labor market report and updates from Big Tech behemoths such as Salesforce and Okta will set the pace for the last month of 2024, which might prove to be highly influential for Federal Reserve decisions, the performance of the stock market, and investor sentiment.

Key Takeaways

November jobs data, due Friday, December 6, will set the tone for Federal Reserve rate decisions.
Big Tech earnings, which include Salesforce and Okta reporting on December 3, are crucial to determining market momentum.
History is on the side of a year-end rally, as strong Novembers have usually been followed by further gains in the S&P 500.
Risks include robust labor data delaying rate cuts, persistent inflation, and potential investor overconfidence.

December Jobs Data: A Crucial Indicator

By far the week's most closely watched event, however, will be the 8:30 a.m. ET release of November's labor market data on Friday, December 6. Analysts see new jobs added in November have reached 200,000 - a sharp rebound from the dismal 12,000 result in October. Meanwhile, the unemployment rate should climb to 4.2% from 4.1%.

This report is important because it will help shape monetary policy at the Federal Reserve. Strong labor data could lower the chances for further rate cuts and weaker figures could open the door to more easing. Wage growth, one of the most important inflation metrics, also will be watched for the economy's momentum.

"While the labor market remains solid in an absolute sense, the softening trend in employment conditions has yet to cease," said Wells Fargo economists. They said the unemployment rate may be a key factor in the Fed's decisions in December.

The Fed's Conundrum: Cut Rates or Hold?

The Federal Reserve's next meeting is on Tuesday, December 18, and a 25-basis-point rate cut is expected. Those are the probabilities, at 66%, according to the CME FedWatch Tool. With strong jobs data, that may be derailed and perhaps push the Fed to keeping the rate where it's at to work on dampening inflation.

Minutes from the Fed's November meeting showed persistent uncertainty over estimates of the neutral rate -where monetary policy is neither stimulating nor slowing the economy. That uncertainty underlines how the incoming economic data, especially the jobs report, will play a big role in future rate decisions.

Big Tech Earnings: Giants to Drive Market Tones

Earnings reports from big companies will be on front pages this week, in which the following are considered key dates:

Salesforce (CRM) and Okta (OKTA) report Tuesday, December 3.
Lululemon (LULU) reports Thursday, December 5.

Together, these reports will provide insight into consumer behavior and enterprise spending at the height of the holiday season. Big Tech companies, responsible for much of the S&P 500's gains this year, remain key to market sentiment.

The consensus earnings revisions for Big Tech have generally been upward. Analysts at UBS highlight robust fundamentals at Amazon, Meta, and Nvidia, among others. "Big Tech is likely to remain a critical EPS growth driver for the S&P 500," Barclays' Venu Krishna commented, underlining how this sector has an outsize impact on the index.

Broader Market Trends: What's Behind Optimism?

The S&P 500 and Dow Jones finished November at all-time highs, buoyed by a very strong earnings season and favorable seasonal trends. According to historical precedent, December should be pretty good too.

The S&P 500 has had an up November in years when it was already up over 20% by that month-which is the case this year-and then always posted additional gains in December, Ryan Detrick at Carson Group explained. This has occurred 9 out of 10 times since 1985.

Besides, falling Treasury yields are improving the backdrop for equities. The 10-year Treasury yield lately reached 4.19% for the first time since October, relieving some pressure from high-growth stocks and adding to their investment luster.

Risks Lurking Ahead for December Investors

It's not all sunshine, though. Risks do exist. Key events in store include:

Friday, December 6: November jobs report release.
Wednesday, December 11: Federal Reserve Chair Jerome Powell's pre-meeting commentary.
Tuesday, December 18: Fed's last rate decision of the year.

Solid labor data may result in stronger interest rates that dampen investor enthusiasm. Strong market sentiment has also opened up the possibility of a contrarian pullback, according to Ed Yardeni of Yardeni Research. Then there is sticky inflation data, particularly in the services sector.

Conclusion

Investors could expect a mixed bag of challenges and opportunities in December. Alongside the November jobs report slated for December 6, Big Tech earnings will arrive throughout the week, and markets are set to be volatile. The Federal Reserve will no doubt make its rate decisions based on this economic data at its December 18 meeting, which will set year-end trends.