S&P 500 Falls as Noisy Jobs Leave Bonds Wavering: Markets Wrap

(Bloomberg) — Signs the US jobs market is sluggish, but not rapidly deteriorating saw traders refraining from boosting bets on near-term Federal Reserve rate cuts, sending stocks lower as bonds wavered.

A noisy reading reflecting some of the impacts of the longest government shutdown in US history was received by traders with caution. The S&P 500 fell for a third straight day. Treasury yields edged mildly lower as swaps implied only 20% odds of a January Fed cut. A reduction is fully priced in by mid-2026.

Nonfarm payrolls increased 64,000 in November after declining 105,000 in October amid a contraction in federal employment. The unemployment rate was 4.6% last month, up from 4.4% in September and the highest since 2021.

“The report contains enough softness to justify prior rate cuts, but it offers little support for significantly deeper easing ahead,” said Kevin O’Neil at Brandywine Global. “With labor market signals sending mixed messages, the next inflation reading may become the primary driver for markets as we enter the new year.”

The Fed is unlikely to put much weight on the data given the disruptions, according to Kay Haigh at Goldman Sachs Asset Management.

“The report on December’s employment data, released in early January ahead of the next meeting, will likely be a much more meaningful indicator for the Fed when it comes to deciding the near-term policy trajectory,” Haigh noted.

While the jobs reading was a “gift” to those looking for the Fed to follow a dovish path in 2026, there’s no indication the broader economy has been derailed, noted Ellen Zentner at Morgan Stanley Wealth Management.

A separate report showed US retail sales were little changed in October as solid spending in several categories was muted by a decline at motor vehicle dealers.

The S&P 500 fell to near 6,780. The yield on 10-year Treasuries dropped three basis points to 4.15%. The dollar slid 0.2%. West Texas Intermediate oil sank to around $55 a barrel.

“Today’s report does not change the thinking for Fed officials at large,” said Oscar Munoz and Gennadiy Goldberg at TD Securities. “In all likelihood, the Fed will look through the October/November jobs data and wait to make a more informed assessment based on a more reliable December report.”

The Fed lowered rates for a third straight meeting last week to support what Chair Jerome Powell called a “gradually cooling” labor market with “significant” risks of a further slowdown. However, Fed officials are split over whether more cuts are needed next year.

“We take a glass half full rather than a glass half empty view of the combined part-October, full November employment report and, more importantly, we think the Fed will too,” said Krishna Guha at Evercore. “Specifically we do not think this was weak enough to spur another near-term rate cut.”

Guha reiterated that he does not have another cut in his forecast until June.

“Between now and then, Powell and Co. will be pragmatic, but more conventionally data dependent,” he said. “And the data will have to come in appreciably worse than expected to deliver another cut.”

“Our baseline outlook hasn’t changed and it’s unlikely to have changed for the Federal Reserve,” said Tiffany Wilding at Pacific Investment Management Co. “An economy with resilient growth (despite policy shocks) and a stable labor market will receive fresh stimulus, front-loaded in 1H 2026.”

At JPMorgan Chase & Co., Michael Feroli says the November household survey data are more subject to a skeptical reading, but the likely ongoing rise in the unemployment rate remains a cause for mild concern.

“We continue to believe these concerns will motivate the Fed to cut rates one more time in January, though that call will be informed by whether the cleaner December jobs report indicates growing labor market slack,” he said.

The jobs reading was at best a mixed review of a labor economy that has neither fallen off a cliff nor regained momentum – a middle ground, but one that’s still quite far from a “not too hot, not too cold” Goldilocks outcome, according to Jim Baird at Plante Moran Financial Advisors.

“The real question is how long the labor economy can persist in a steady state of low payroll growth,” he said. “In that regard, today’s report offered little clarity, leaving plenty of unanswered questions about what lies ahead.”

“The recent employment data didn’t rock the boat too much,” said Ryan Detrick at Carson Group. “We assumed the labor market was weakening some. Still, there’s something for everyone in there, as November jobs were better than expected, which could be a clue the post summer weakness is ending.”

Bottom line, Detrick says: this continues to give the Fed cover for a dovish tilt in 2026.

“There’s data, but not clarity, and this situation is consistent with a Fed pause in January,” said Don Rissmiller at Strategas. “The uptrend in the US unemployment rate is likely to keep the Fed’s bias toward an eventual easing again in 2026. A stalled labor market still needs some support.”

This print alone shouldn’t meaningfully shift expectations for the path of Fed cuts, nor is it low enough to create new downward pressure on risk assets, according to Adam Hetts at Janus Henderson Investors.

“Higher unemployment might seem dovish for rates,” said David Russell at TradeStation. “However, it resulted from government job cuts and not weakness in the cyclical economy. This data does little to move the needle after three cuts, especially because policymakers know stimulus is coming.”

Traders are sticking with their call that the Fed makes two quarter-point reduction in policy rates next year, one more than Fed officials’ median forecast.

“Today’s data paints a picture of an economy catching its breath,” said Gina Bolvin at Bolvin Wealth Management Group. “Job growth is holding on, but cracks are forming. Consumers are still standing, but not sprinting.”

This combination gives the Fed more freedom to pivot without panic — and gives investors a reason to lean into quality, income, and long-term themes rather than short-term noise, Bolvin said.

“We’re entering a market environment where selectivity matters more than ever,” she said.

At eToro, Bret Kenwell says investors should not cheer for a notable deterioration in the jobs market, which would have a direct impact on the economy and on corporate earnings.

“Should we see continued consumer strength and a labor market that steadies itself in 2026, it could be another strong year for US stocks,” he said.

“Our view remains that the Fed is likely to cut interest rates by another 25 basis points in the first quarter of next year, providing a favorable backdrop for risk assets,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “But with volatility likely to pick up as markets assess fresh data, we think investors should revisit some of the foundational principles in constructing a resilient portfolio.”

Money managers are set to ring in the new year with resounding confidence about everything from economic growth to equities and commodities, according to a monthly poll by Bank of America Corp.

Strategist Michael Hartnett said this level of optimism has been seen only eight times this century. Still, the tally shows there are lingering concerns about US tech valuations, with an artificial-intelligence bubble still viewed as the biggest tail risk.

Meantime, the message from sell-side analysts is that there’s still fuel in the tank for Corporate America.

Their aggregated bottom-up price targets suggest the pace of income growth in the S&P 500 will accelerate each year through 2027, data compiled by Jefferies show. That would translate into three consecutive years of double-digit earnings expansion.

Corporate Highlights:

Pfizer Inc. forecast little to no sales growth next year, a warning sign as the drugmaker works rebuild its pipeline of hit drugs with a series of pricey acquisitions. Kraft Heinz Co. named a new chief executive officer, with former Kellanova CEO Steve Cahillane set to take over from Carlos Abrams-Rivera on Jan. 1. Visa Inc. is opening its US network to stablecoin settlement, expanding crypto-linked products and services enabled by the relaxed regulatory environment under the second Trump administration. Medline Inc.’s long-delayed initial public offering is on track to raise the most of any listing this year, as investors keen on the medical supply company’s business model look past its rocky path back to the public markets. Nasdaq Inc., the second-largest exchange in the US, is looking for regulatory approval to extend trading hours on its stock venues to 23 hours during the work week. B. Riley Financial Inc. said it filed its overdue second-quarter report with US regulators, bringing the firm closer to satisfying demands from Nasdaq that will keep the stock from being delisted. Mozilla Corp. elevated the head of its Firefox web browser to chief executive officer of the company, which is trying to position itself as an independent, privacy-focused alternative to Big Tech options. Databricks is raising over $4 billion in a new funding round that values the software firm at $134 billion, another example of how some tech companies are achieving massive scale without going public. Northwell Health Inc., one of New York state’s largest hospital systems, has signed a deal with a major labor union intended to lower costs and expand access to thousands of doctors for its members in the New York area. President Donald Trump sued the BBC for at least $10 billion over a misleading edit in a documentary last year that gave the impression he’d made a direct call for violence in a speech leading up to the Jan. 6, 2021, attack on the US Capitol by his supporters. Gucci owner Kering SA will get $690 million following its sale of a stake in a New York property to French investment fund Ardian as part of the fashion group’s efforts to shrink its debt. Thames Water has deferred payment of almost £2.5 million ($3.4 million) in bonuses to its senior managers this month bowing to pressure not to reward staff while the company is ranked among the worst-polluting suppliers in the UK. The Canadian government has approved Anglo American Plc’s acquisition of Teck Resources Ltd., helping to clear the way for the creation of a $50 billion metals giant focused on copper mines in Chile and Peru. China’s Luckin Coffee Inc. is considering making a bid for Nestle SA’s Blue Bottle Coffee to boost its brand profile and expand in the premium coffee segment, according to people familiar with the situation. Some of the main moves in markets:

Stocks

The S&P 500 fell 0.5% as of 12:33 p.m. New York time The Nasdaq 100 fell 0.2% The Dow Jones Industrial Average fell 0.6% The MSCI World Index fell 0.5% Bloomberg Magnificent 7 Total Return Index was little changed The Russell 2000 Index fell 0.6% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1776 The British pound rose 0.5% to $1.3437 The Japanese yen rose 0.4% to 154.62 per dollar Cryptocurrencies

Bitcoin rose 1.3% to $87,345.48 Ether fell 0.4% to $2,932.27 Bonds

The yield on 10-year Treasuries declined three basis points to 4.15% Germany’s 10-year yield was little changed at 2.84% Britain’s 10-year yield advanced two basis points to 4.52% The yield on 2-year Treasuries declined two basis points to 3.48% The yield on 30-year Treasuries declined two basis points to 4.82% Commodities

West Texas Intermediate crude fell 2.3% to $55.51 a barrel Spot gold was little changed ©2025 Bloomberg L.P.