The University of Michigan's consumer sentiment index rose to 74.0 in December, its highest since April, surpassing forecasts of 73.0, driven by improved perceptions of current conditions and durable goods purchasing. However, the expectations subindex fell to 71.6 from 76.9, while year-ahead inflation expectations climbed to 2.9%, the highest in five months.

The U.S. added 227,000 jobs in November, beating forecasts of 200,000 and rebounding from October’s 36,000 gain impacted by strikes and hurricanes. Key sectors saw gains, including healthcare (+54,000), leisure and hospitality (+53,000), and government (+33,000). Unemployment edged up to 4.2%, while average hourly earnings rose 0.4% to $35.61, reflecting a 4% year-over-year increase.

These mixed signals—strong job growth, rising inflation expectations, and higher unemployment—create a complex backdrop for the Federal Reserve's December 17-18 meeting on interest rate adjustments.

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Consumer Discretionary Stocks Rage Heading Into Christmas Season

The S&P 500 sectors experienced mixed performance this week, with Consumer Discretionary leading the gains at +5.9%, followed by Telecom (+4.1%) and Information Technology (+3.4%). Defensive sectors underperformed, with Utilities (-3.8%) and Consumer Staples (-0.8%) posting losses, while Healthcare (-2.1%) and Real Estate (-2.6%) also declined. Cyclical sectors showed volatility, with Energy (-4.6%) and Materials (-3%) recording steep declines, reflecting broader concerns in the commodity and energy markets. Financials (-1.8%) and Industrials (-2.3%) also weakened, highlighting a challenging environment for these sectors amid shifting market dynamics.

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