What you need to know…

The S&P 500 Index ($SPX) (SPY) on Friday fell -0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) rose +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) fell -0.40%.  

Stocks on Friday settled mixed.  Stocks Friday morning initially sold off after bond yields jumped on concern the Fed may have to keep monetary policy tighter due to Friday’s stronger-than-expected U.S. Nov payroll report.  However, stocks recovered from their worst levels as T-note yields fell back for the remainder of the day.  The 10-year T-note yield Friday finished the day down -0.1 bp at 3.504% after initially climbing to 3.633%.

A more than +4% jump in Boeing on Friday lifted the Dow Jones Industrials into positive territory after the Wall Street Journal reported that United Airlines Holdings is nearing a deal to order nearly one hundred 787 Dreamliners.

Fed comments Friday were hawkish for Fed policy and bearish for stocks.  Chicago Fed President Evans said in order to cool price pressures, "we probably are going to have a slightly higher peak of the fed funds rate, even as we likely will step down the pace of rate increases."  Also, Richmond Fed President Barkin said the U.S. "labor supply looks like it will remain constrained," which could keep upward pressure on inflation and require firms to spend more to attract and keep their workers.

U.S. Nov nonfarm payrolls rose +263,000, stronger than expectations of +200,000.  The Nov unemployment rate was unchanged at 3.7%, right on expectations.

U.S Nov average hourly earnings eased to +5.1% y/y from +5.6% y/y in Oct but were still higher than expectations of +4.6% y/y.

In a note to clients today, Bank of America said investor optimism around a cooling labor market and a Federal Reserve pivot is overdone and recommends "selling risk rallies in stocks from here" as unemployment would replace inflation as the main worry in 2023.

Today’s stock movers…

Paypal Holdings (PYPL) closed down more than -4% to lead losers in the S&P 500 after data from Bloomberg showed DWS Capital Growth Fund sold off its position of 80,773 shares of Paypal Holdings. 

Energy stocks and energy service providers were under pressure Friday after crude prices fell more than -1% and nat-gas prices tumbled more than -6% to a 2-week low.  EQT Corp (EQT) and Valero Energy (VLO) closed down more than -3%.  Also, NRG Energy (NRG) closed down more than -2%.  In addition,  Marathon Petroleum (MPC), Xcel Energy (XEL), CMS Energy (CMS), Phillips 66 (PSX), Marathon Oil (MRO), EOG Resources (EOG), Alliant Energy (LNT), and WEC Energy Group (WEC) closed down more than -1%.

Zscaler (ZS) closed down more than -10% to lead losers in the Nasdaq 100 after forecasting 2023 calculated billings of $1.93 billion-$1.94 billion, the mid-point below the consensus of $1.94 billion. 

Veeva Systems (VEEV) closed down more than -8% after forecasting Q4 revenue of $551 million-$553 million, well below the consensus of $560.6 million.

Advanced Micro Devices (AMD) closed down more than -3% after data from Bloomberg showed AB Large Cap Growth Fund sold off its 1.59 million share position of Advanced Micro Devices in October. 

DoorDash (DASH) closed down more than -3% after RBC Capital Markets downgraded the stock to sector perform from outperform. 

Salesforce (CRM) closed down more than -1% Friday to lead losers in the Dow Jones Industrials after Wolfe Research downgraded the stock to peer perform from outperform. 

Defense contractors and weapons builders rallied Friday on optimism that a compromise defense policy bill will pass Congress which will boost national security spending by about $45 billion more than President Biden proposed.  Huntington Ingalls (HII) closed up more than +4%.  Also, Lockheed Martin (LMT), L3Harris Technologies (LHX), and Northrop Grumman (NOC) closed up more than +2%.

Boeing (BA) closed up more than +4% Friday to lead gainers in the Dow Jones Industrials after the Wall Street Journal reported that United Airlines Holdings is nearing a deal to order dozens of 787 Dreamliners.

U.S.-listed Chinese stocks moved higher as an easing of Covid restrictions in China has improved market sentiment toward Chinese technology stocks.  JD.com (JD) closed up +5%.  Also, Alibaba Group Holding (BABA) and Baidu (BIDU) closed up more than +4%.  In addition, Pinduduo (PDD) and NetEase (NTES) closed up more than +3%

UiPath (PATH) closed up more than +12% after reporting Q3 total revenue of $262.7 million, well above the consensus of $246.5 million. 

Across the markets…

March 10-year T-notes (ZNH23) on Friday closed up +1.5 ticks, and the 10-year T-note yield fell -0.1 bp to 3.504%.  March T-notes Friday recovered from early losses and closed slightly higher as short-covering emerged and sparked stop-loss buying of T-note futures as prices crept higher from Friday morning’s initial sell-off.  T-notes still have carry-over support from Wednesday when Fed Chair Powell said the Fed would slow its pace of rate hikes. 

T-note prices Friday initially sold off on a stronger-than-expected U.S. Nov payrolls report.  Also, hawkish comments Friday from Richmond Fed President Barkin and Chicago Fed President Evans weighed on T-note prices.   In addition, inflation expectations increased after the 10-year breakeven inflation rate rose to a 3-week high of 2.459%.

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