Stocks Settle Mixed on Sector Rotation

Economic Indicators - US nonfarm payrolls for December are expected to increase by +70,000, with the unemployment rate anticipated to decrease by -0.1% to 4.5% [1] - Average hourly earnings for December are projected to rise by 0.3% month-over-month and 3.6% year-over-year [1] - October housing starts are expected to increase by 1.8% month-over-month to 1.33 million, while building permits are anticipated to rise by 1.5% month-over-month to 1.35 million [1] - The University of Michigan's January consumer sentiment index is expected to climb by +0.6 points to 53.5 [1] Trade and Productivity - The US trade deficit for October unexpectedly shrank to -$29.4 billion, significantly better than the expected widening to -$58.7 billion, marking the smallest deficit in 16 years [2] - Q3 nonfarm productivity rose by +4.9%, close to expectations of +5.0%, representing the largest increase in two years [2] - Q3 unit labor costs fell by -1.9%, exceeding expectations of a -0.1% decline [2] Labor Market - December Challenger job cuts fell by -8.3% year-over-year to 35,553, the lowest level in 17 months, indicating a supportive factor for the US labor market [3] - Weekly initial unemployment claims rose by +8,000 to 208,000, which is lower than the expected 212,000, suggesting a stronger labor market [2] Stock Market Movements - Defense stocks rallied sharply after President Trump indicated plans to increase military spending to $1.5 trillion next year, with notable gains in companies like AeroVironment and Huntington Ingalls Industries [4][15] - Energy producers saw gains as WTI crude oil rose by more than +3%, leading to significant increases in stocks like APA Corp and Diamondback Energy [16] - Chipmakers and data storage companies experienced declines, with Seagate Technology and Western Digital leading the losses [13][14] Interest Rates and Bonds - The 10-year T-note yield rose by +3 bp to 4.18%, influenced by positive labor market indicators and a significant amount of corporate bond sales totaling $88.4 billion for the week [5][9] - European government bond yields were mixed, with the 10-year German bund yield rising by +5.1 bp to 2.863% [10]