Stock Market Today: Slowing Wage Growth Spurs Major Stock Rally
While the U.S. added more jobs than expected in December, growth in average hourly earnings slowed.


Stocks shot higher Friday as investors cheered the latest jobs report. Although data from the Labor Department showed that hiring remains strong, a lower-than-expected rise in wages suggests that the Federal Reserve's efforts to cool inflation with aggressive interest-rate hikes is working. This was the kind of silver lining that Wall Street has been looking for – and the stock market responded in kind.
Looking closer at the numbers from the December jobs report shows the U.S. added 223,000 jobs last month. Although this was the smallest gain in two years, it was well above what most economists were expecting. Additionally, the unemployment rate fell to 3.5% from 3.7%.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
At first glance, December's strong job creation wasn't very encouraging. After all, the Fed is intent on slowing the economy in order to tame fast-rising prices. What gave investors hope, however, were the wage growth figures. Specifically, average hourly earnings – a key measure of inflation tracked by the Fed – rose 0.3% month-over-month and 4.6% year-over-year. Both figures were lower than economists' average estimates, as well as the pace of wage growth seen in the November jobs report.
"This absolute level is still too high for Chairman Powell, who has remarked that wages are running too hot to be consistent with the Fed's 2% inflation mandate," says Daniel Berkowitz, senior investment officer for Prudent Management Associates. "With that said, the data is clearly moving in the right direction. All in all, today's jobs numbers offered a Goldilocks scenario, not too hot, not too cold – and on the heels of a 'just right' report, stocks are rallying."
Indeed, the Dow Jones Industrial Average jumped 2.1% to 33,630, the S&P 500 gained 2.3% to 3,895, and the Nasdaq Composite added 2.6% to 10,569.
Top Inflation Hedges
Today's wage growth data provided another encouraging read on inflation. But the really big update will come next Thursday morning with the release of the December consumer price index (CPI).
The past two CPI reports showed that consumer price growth moderated in October and November, and expectations are for it to have slowed further in December. That said, inflation remains high – and well above the Fed's target. Douglas Porter, chief economist at BMO Capital Markets, continues "to believe that underlying inflation will remain stickier than expected, even with this week's admittedly encouraging developments on a number of fronts."
With this in mind, investors would do well to continue including inflation hedges in their portfolios. As we've mentioned several times in this space, these hedges against rising prices can include healthcare and consumer staples stocks, which provide goods and services that people tend to buy no matter what. The best inflation-beating stocks are also certainly worth a closer look.

With over a decade of experience writing about the stock market, Karee Venema is an investing editor and options expert at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.
-
How To Use Sector Rotation In Investing
Anticipating turns in the economy through sector rotation can pay off for nimble investors.
By Nellie S. Huang Published
-
A Disability Doesn’t Have to Force an Early Retirement
A feature on what people who experience disabilities later in life can do about work.
By Alina Tugend Published
-
Stock Market Today: Stocks Keep Their Weekly Win Streak Alive
The main indexes closed mixed Friday, though all three nabbed a fourth straight weekly gain.
By Karee Venema Published
-
Stock Market Today: Stocks Resume Their Winning Ways
The major benchmarks rebounded from a rare down session to post broad-based gains Wednesday.
By Dan Burrows Published
-
Stock Market Today: Stocks Close Lower After Fed Minutes, Retail Earnings
Burlington was a big winner on the earnings front, while Kohl's slumped after its results.
By Karee Venema Published
-
Stock Market Today: Microsoft Gains Boost Stock Market
The blue chip stock popped on news the software giant has snagged OpenAI's ousted CEO to help lead an advanced AI research team.
By Karee Venema Published
-
Stock Market Today: Stocks Extend Weekly Win Streak Ahead of Thanksgiving
Although the main indexes were quiet to end the week, Gap stock soared after the retailer reported earnings.
By Karee Venema Published
-
Stock Market Today: Dow Drops After Cisco, Walmart Earnings
The S&P 500 and Nasdaq managed marginal gains Thursday.
By Karee Venema Published
-
Stock Market Today: Stocks Keep Climbing After Latest Inflation Data
While the main indexes gained ground on a welcome producer price index report, Target surged after disclosing an unexpected Q3 profit.
By Karee Venema Published
-
Stock Market Today: Dow Spikes 489 Points After Encouraging Inflation Data
Tuesday's cooler-than-expected CPI report lit a fire under stocks.
By Karee Venema Published