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It seems like whether you’re a seasoned pro or just starting out in the trading world, the first Friday of the month and the employment data Stateside always generate excitement and potential high volatility in financial markets.

For equities, the easing of financial conditions has been hugely important in the strong moves higher we have seen since the US indices bottomed out in late October.

Economists reckon those conditions, which include an array of financial indicators like equity valuations and bond yields, are equivalent to nearly four 25bps rate cuts.

And that has come mostly in just one month during November.
 

FOMC coming into focus…

Of course, we get the final Fed meeting of the year next week when policymakers will also publish their latest dot plot and summary of economic projections.

The timely US CPI data is released the day before on Tuesday.

Fed Chair Powell was widely perceived to have been dovish when he said at the last FOMC press conference that tighter financial conditions were helping do the Fed’s work.

That environment has now been turned on its head and is certainly not what the Fed intended. That means all eyes will be what picture the FOMC and Powell are painting for the months ahead.

NFP to show gains…

Before then, attention is on Friday’s NFP with Wall Street analysts expecting around 180k of job gains.

While that would be an acceleration from the prior month, it is still below the three- and six-month averages just above 200k.

Economists say the small tick up in the headline will be down to the impact of the Detroit Three United Auto Workers strike in October, rather than a revival in the labor market.

A consensus print probably underpins support for the rate cut theme and could see a small bid in stock markets though the focus will turn quickly to next week.

The S&P 500 gained nearly 9% gain in November which has historically been a strong month for the index.

Overall, December has been the second-best month for the S&P 500, with the index up an average of 1.54% for the month since 1945, according to CFRA.

It is also the month most likely to post a gain, with the index rising 77% of the time, analyst’s data showed. It undeniably feels like a defining few days for how stocks finish a surprisingly strong year.

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