A relatively quiet day on Wall Street resulted in a win for stocks as bargain hunters swooped in following a stretch of losses for the major market indexes. The recent spate of selling was sparked by worries that the Federal Reserve will keep hiking interest rates and hold them higher for longer as the U.S. economy continues to show signs of strength. However, this morning's weekly jobless claims data hinted that the Fed's aggressive policy could finally be starting to slow the labor market – and gave investors a much-needed silver lining of hope.
Specifically, data from the Labor Department showed weekly jobless claims rose slightly to 230,000 last week, which was in line with economists' estimates. Continuing claims increased by 62,000 to 1.67 million, or the most since February.
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"While initial jobless claims are still low, hiring is slowing sharply, translating to a much larger share of job-losers who continue to claim jobless benefits after their first week unemployed," says Bill Adams, chief economist for Comerica Bank. "Other data similarly point to slower hiring. The hires rate in October was its lowest since the pandemic struck the United States, and LinkedIn's Hiring Index fell 20.5% year-over-year in November."
The bad news on the labor front was good news for the equities market. The S&P 500 Index snapped its five-day losing streak, adding 0.8% to 3,963. The tech-heavy Nasdaq Composite rose 1.1% to 11,082 and the blue-chip Dow Jones Industrial Average gained 0.6% to 33,781.
The Best Energy ETFs to Buy
Not everything ended Thursday's session on a high note, however. Energy (-0.5%) was one of just two sectors that finished in the red (communication services (-0.2%) being the other), extending a recent bout of weakness over concerns of slowing global demand. Still, the sector has had a standout run in 2022 and remains up more than 50% for the year-to-date.
Following a year like this, what are the chances energy can repeat its success in 2023? While it's unlikely oil stocks will once again post the impressive gains they accumulated this year, there are certainly many catalysts that can keep the wind at their back – including the continued easing of COVID-19 restrictions in China.
And there are plenty around Wall Street who remain optimistic toward energy heading into the new year. "We see energy sector earnings easing from historically elevated levels yet holding up amid tight energy supply," says Carrie King, global deputy chief investment officer at BlackRock Fundamental Equities, adding that among cyclical sectors, her firm favors energy (and financials) in 2023. For those who believe there's still some gas left in the tank, check out these eight top energy ETFs to buy right now.
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