Major US indexes ended the first week of December higher, supported by expectations of a potential Fed rate cut. The Nasdaq (+0.91%) led gains, followed by the Russell 2000 (+0.84%), while the S&P 500 posted a modest rise on light trading volumes. Economic data showed manufacturing activity contracting for a ninth month as the ISM PMI slipped to 48.2, driven by weaker orders, employment, and deliveries, while services activity strengthened to a nine-month high at 52.6. The labor picture was mixed: ADP reported a 32,000 drop in private payrolls – the sharpest decline since 2023 – alongside elevated job-cut announcements, yet jobless claims unexpectedly fell to the lowest since 2022. September PCE inflation was unchanged at 0.3% m/m, and consumer sentiment improved slightly. Treasuries posted negative returns as long-term yields rose, while municipal bonds outperformed and high yield bonds advanced.
Markets continued to price in greater odds of a rate cut at the upcoming Fed meeting, supported by cooling inflation data, moderating economic activity, and softer employment indicators, despite lingering resilience in services and labor demand.
European equities were mixed, with the STOXX Europe 600 up 0.41% on global rate-cut optimism. Eurozone inflation ticked up slightly to 2.2%, GDP for Q3 was revised higher to 0.3% on stronger investment, and unemployment held steady at 6.4%, while retail sales showed modest improvement year over year.
