By Jeff Mason and Steve Holland

BLUE BELL, Pennsylvania (Reuters) -President Joe Biden on Friday accused Republican Donald Trump, his likely 2024 election opponent, of instigating the Jan. 6 attacks and plotting revenge on those seeking to punish him, putting the deadly 2021 uprising at the center of his bid for re-election.

“He told the crowd to fight like hell. And all hell was unleashed,” Biden said. “Then as usual he left the dirty work to others. He retreated to the White House.”

Biden marked three years since the Jan. 6, 2021, attacks with his first major campaign speech of the year, applying the heat on Trump as his campaign pushes against questions about his handling of the U.S. economy and his age, 81. Trump is 77.

Biden said Trump’s re-election bid is based on trying to seek “revenge and retribution” against his political enemies. He reminded Americans that Trump has called his opponents “vermin,” the “same exact language used in Nazi Germany.”

“How dare he? Who in God’s name does he think he is?” said Biden, lowering his voice to a whisper.

Biden vowed that he will make the defense, protection and preservation of democracy his central promise, and suggested that a vote for Trump meant a vote for a dictatorship.

“Democracy is on the ballot. Your freedom is on the ballot,” he said.

Trump, president from 2017 to 2021, who is leading the field for the Republican nomination for president, contested his defeat in the 2020 election, prompting thousands of his supporters to attack the U.S Capitol on Jan. 6, 2021. The failed bid to stop formal certification of the result resulted in the deaths of five people and injured dozens of police officers.

Biden said when the attacks of Jan. 6 on the U.S. Capitol took place, “there was no doubt about the truth” and that even some Republican members of Congress and Fox News commentators had publicly and privately condemned the uprising from Trump supporters.

“But now as time has gone on — politics, fear, money – have all intervened. And those MAGA voices who know the truth about Trump and January 6th have abandoned the truth and abandoned our democracy,” Biden said.

Republicans challenging Trump in the 2024 nominating contest have mostly steered clear of criticizing Trump’s actions on that day, as opinion polls show Republican voters are less likely to blame Trump for his actions on Jan. 6 than they were three years ago.

Before his speech at a community college in Blue Bell, Pennsylvania, Biden took a tour of the Valley Forge site of George Washington’s Revolutionary War-era winter headquarters in the bitterly cold months of late 1777 and early 1778.

In his speech, Biden compared Trump’s bid to hang on to power to the example set by Washington, who stepped down willingly after two terms as he first U.S. president.

Biden gave a vivid description of what transpired on Jan. 6, saying protesters called for the hanging of then-Vice President Mike Pence, and that people died because Trump’s lies “brought a mob to Washington.”

Ahead of Biden’s speech, the Trump campaign released an ad accusing Biden of being “the true destroyer of democracy” citing special counsel Jack Smith’s investigation into Trump’s actions on Jan. 6.

Smith, a veteran prosecutor known for pursuing mob bosses, has charged Trump with conspiring to illegally subvert the results of the 2020 election.

The ad said Biden was attempting “to justify his push to imprison his leading political rival and deprive Americans of their right to choose their next president through corrupt political lawfare.”

Biden’s attorney general Merrick Garland defended his department’s handling of the Trump cases.

“The Justice Department is abiding by the longstanding norms that ensure the independence and integrity of our investigations,” adding “We are upholding the rule of law and we are protecting the American people,” he said.

As president, Biden has warned about the future of U.S. democracy before, including on the first anniversary of Jan. 6, and in a fiery Sept. 2022 speech where he called Trump and his Republican followers extremists who threatened to take the country backward.

Whether Biden’s Friday speech will make an impact 10 months before Election Day – in a politically polarized country where voters get news and information from wildly different sources – remains to be seen.

The 2024 race is expected to be closely contested, and Biden aides see Pennsylvania, home to Biden’s Scranton birthplace, as a must-win state. He won in 2020 with 50.01% of the vote. In 2016, Trump won Pennsylvania with 48.58% of the vote.

Biden’s arguments have done little to soothe his own supporters’ concerns about the state of the economy or his age, 81.

(Reporting by Jeff Mason and Trevor Hunnicutt; Additional reporting by Andrew Goudsward; Writing by Steve Holland; Editing by Heather Timmons, Jonathan Oatis and Alistair Bell)

By David French

(Reuters) – U.S. stock indexes endured a topsy-turvy session on Friday but ultimately closed marginally higher, as investors absorbed the latest macroeconomic data which offered contrasting views on when interest rate cuts may begin.

In terms of weekly performance, both the S&P 500 and Nasdaq Composite ended the first week of 2024 with notable negative performance: The S&P 500 recorded its worst weekly performance since late October, while the Nasdaq posted its worst week since late September.

After a week of negative performance, both the S&P 500 and Nasdaq gyrated through the day. Initially, robust jobs data doused expectations of rapid easing of interest rates, pushing futures lower, before data from the Institute for Supply Management (ISM) services sector data pointing to a weaker economy encouraged those betting on rapid easing, sending markets higher.

However, despite fighting to hold onto gains in the afternoon, markets dipped back into negative territory.

Investors have been cautious in the opening sessions of 2024, as they awaited further clarity on when interest rate cuts will begin, and how quickly they will happen.

Hopes for a swift pace of easing had triggered a blistering rally in the final weeks of 2023, so any undermining of that hypothesis has been a cue for profit-taking.

“For now, it probably looks like a healthy correction for a market that was overbought at the end of last year,” said Greg Boutle, head of US equity & derivative strategy at BNP Paribas.

The ISM survey showed services sector activity, which accounts for more than two-thirds of the economy, fell to 50.6 in December from 52.7 in the previous month. Economists polled by Reuters had forecast 52.6.

Meanwhile, the Labor Department report showed U.S. employers hired more workers than expected in December, while raising wages at a solid clip.

“In terms of the macro data, I think there’s something for everybody, in terms of the data that we’re seeing,” said Boutle.

He added though that this week’s data releases were unlikely to have convinced anyone to have changed their minds from their position on rate-cuts coming into the year.

Traders see a 66.4% chance of at least a 25-basis point cut in March, according to the CME Group’s FedWatch tool.

The yield on the benchmark U.S. Treasury 10-year note, reflecting interest rate expectations, ticked up into the afternoon and was back above 4%. [US/]

The financials index was among the S&P 500 sectors in positive territory, having notching an over 1-1/2-year high earlier in the day.

Banks continued to perform well, ahead of the start of earnings season next week, with the S&P Banks index hitting an 11-month high. Large regional banks were buoyant, with KeyCorp, Citizens Financial Group and Comerica Inc all rising.

According to preliminary data, the S&P 500 gained 8.37 points, or 0.18%, to end at 4,697.05 points, while the Nasdaq Composite gained 11.47 points, or 0.09%, to 14,521.77. The Dow Jones Industrial Average rose 24.09 points, or 0.07%, to 37,464.43.

Applied Therapeutics tumbled after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.

Palantir Technologies lost after Jefferies downgraded the data analytics firm to “underperform” on high stock valuations.

Peloton jumped after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Aurora Ellis)

By Herbert Lash and Naomi Rovnick

NEW YORK/LONDON (Reuters) -Bond prices and a gauge of global equity performance eased in choppy trading on Friday after a surprisingly strong U.S. employment report increased the odds that the Federal Reserve can engineer a “soft landing” for the U.S. economy.

U.S. employers hired more workers than expected last month while raising wages at a solid clip, leading markets to dial back bets the Fed would start cutting interest rates in March.

But a weak report from the Institute for Supply Management (ISM) that showed service sector employment plunged to 43.3 in December to the lowest level since July 2020 led the rate cut outlook to rise a bit. The index was at 50.7 in November. A reading above 50 indicates expansion, while one below that number shows contraction.

The ISM report was weaker than expected, but there is some volatility associated with it, said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan.

“That’s another sign that the economy is moderating. But again, that’s good that it’s moderating down to a sustainable pace,” Price said. “It supports the case that the Fed is doing a good job of raising the odds of the soft landing.”

Futures traders on Friday saw a 68.3% chance of the Fed in March starting to lower its benchmark overnight interest rate from the current 5.25% to 5.50% range, according to the CME Group’s FedWatch Tool. That’s 1 percentage point higher than Wednesday.

Stocks on Wall Street rebounded after an initial decline, lifting MSCI’s broadest index of world stocks 0.17%. Prices for Treasuries, which move inversely to their yield, rebounded at first, too, but later declined.

The U.S. jobs report was “a sizable positive surprise that indicated the domestic economy continues to do well and expand,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“At least for now, it reversed the profit-taking that the market has experienced during this first week of the year.”

The Fed is hoping to drive inflation back down to its 2% target without triggering a recession or a sharp rise in unemployment, a scenario dubbed the “soft landing” by policymakers and financial markets.

The yield on the benchmark 10-year note rose 5.3 basis points to 4.044%. On the week, the 10-year’s yield rose 13.1 basis points, the largest weekly gain since mid-October.

The dollar index, a measure of the U.S. currency against six peers, slid 0.02% and the euro was unchanged at $1.0943.

In Europe, the pan-regional STOXX 600 index closed down 0.27% while on Wall Street, the Dow Jones Industrial Average fell 0.14%, the S&P 500 lost 0.08% and the Nasdaq Composite dropped 0.14%. The blistering rally for equity markets at the end of 2023 was based on expectations that the Fed, alongside significant easing by the European Central Bank, would cut rates six times this year.

The monthly nonfarm payrolls report showed the U.S. economy added 216,000 new jobs in December. Economists polled by Reuters had expected a gain of 170,000.

The jobless rate held steady at 3.7%, down from most forecasters’ expectations for it to rise, prompting concerns that the Fed’s long battle to tame inflation may have further to run.

However, future labor demand is very soft and every other piece of the unemployment report is pointing in a downward direction, said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities in New York.

The number of private wage and salary workers has declined, overall aggregate hours, a proxy for GDP, haven’t grown for three months in a row, and temporary employment has been down for 11 straight months, he said.

“You take the headline numbers, which are a little bit better than expected, and people are drawing the incorrect conclusion that the report is strong,” LaVorgna said.

Euro zone inflation data on Friday showed prices in the currency bloc rose 2.9% on a year-on-year basis in December, up from 2.4% in November and potentially creating less urgency for the ECB to start cutting borrowing costs from record highs.

Elswhere in financial markets, Japan’s Nikkei added 0.3% as exporters got a boost from a weaker yen. A deadly New Year’s Day earthquake in Japan has also forced wagers for the ultra-dovish Bank of Japan to tighten monetary policy this month off the table.

Oil prices rose as U.S. Secretary of State Antony Blinken began a weeklong sweep through the Middle East in an attempt to contain regional tensions as the Israel-Hamas conflict rages.

U.S. crude futures rose $1.62 to settle at $73.81 a barrel and Brent futures settled up $1.17 at $78.76.

U.S. gold futures held steady after swinging up and down a percentage point on the mixed U.S. economic data. But non-interest-bearing bullion eyed its first weekly decline in four on an overall stronger dollar and higher Treasury yields.

CME gold futures settled mostly unchanged at $2,049.80 an ounce.

(Reporting by Herbert Lash; additional eporting by Naomi Rovnick, Kevin Buckland and Ankur Banerjee; Editing by Ros Russell, Mark Potter, Emelia Sithole-Matarise, Paul Simao and Jonathan Oatis)

By David French and Johann M Cherian

(Reuters) – U.S. stock indexes were fighting to hold onto gains into the afternoon on a topsy-turvy Friday, following data releases which offered contrasting views on when interest rate cuts may begin.

After a week of negative performance, both the S&P 500 and Nasdaq Composite traded higher in the morning after services sector data pointing to a weaker economy raised bets of faster interest-rate cuts this year.

The data from the Institute for Supply Management (ISM) came hours after robust jobs data doused expectations of rapid easing, which had pushed futures lower prior to the open.

Investors have been cautious in the opening sessions of 2024, as they awaited further clarity on when interest rate cuts will begin, and how quickly they will happen.

Hopes for a swift pace of easing had triggered a blistering rally in the final weeks of 2023, so any undermining of that hypothesis has been a cue for profit-taking.

The ISM survey showed services sector activity, which accounts for more than two-thirds of the economy, fell to 50.6 in December from 52.7 in the previous month. Economists polled by Reuters had forecast 52.6.

Markets had initially scaled back bets for a March rate cut after a Labor Department report showed U.S. employers hired more workers than expected in December, while raising wages at a solid clip.

Traders now see a 71% chance of at least a 25-basis point cut in March, up from nearly 55% earlier in the day, according to the CME Group’s FedWatch tool.

“The name of the game with the numbers today is that employment, it’s weaker than advertised when you take into account the revisions,” said Thomas Hayes, chairman at Great Hill Capital.

“And on ISM non-manufacturing data, it came in lower than estimated as well and that keeps the Fed cuts sooner rather than later on the table and that’s what the market likes.”

The yield on the benchmark U.S. Treasury 10-year note, reflecting interest rate expectations, ticked up into the afternoon and was back above 4%. [US/]

The S&P 500 is on track for its worst weekly performance since late October, while the Nasdaq is on course for its worst week since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.

At 1:47 p.m. ET, the Dow Jones Industrial Average was up 49.56 points, or 0.13%, at 37,489.9, the S&P 500 was up 13.87 points, or 0.3%, at 4,702.55, and the Nasdaq Composite was up 50.79 points, or 0.35%, at 14,561.09.

The financials index was among the S&P 500 sectors in positive territory. It was trading 0.5% higher, having notching an over 1-1/2-year high earlier in the day.

Banks continued to perform well, ahead of the start of earnings season next week, with the S&P Banks index up 1.4% at an 11-month high. Large regional banks were buoyant, with KeyCorp , Citizens Financial Group <CFG.N> and Comerica Inc all rising more than 2.8%.

Applied Therapeutics tumbled 37.6% after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.

Palantir Technologies lost 1.2% after Jefferies downgraded the data analytics firm to “underperform” on high stock valuations.

Peloton jumped 8.4% after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Aurora Ellis)

(Reuters) – Early data indicates global oil consumption in December grew at the slowest pace in nine months, J.P. Morgan said in a note on Friday.

The research firm, however, said despite undershooting expectations in the last month of 2023, global oil demand growth was in line with yearly expectations.

While demand in December possibly grew 1.3 million barrels a day year-on-year, demand for the whole of 2023 was estimated to have grown 1.8 million barrels a day.

U.S. gasoline demand in the last month of 2023 is expected to come in at 8.6 million barrels a day – 100,000 barrels a day lower than what was expected two weeks ago by the New York-based firm. [EIA/S]

In Europe, most countries reported a decline in oil demand due to continued weakness in industrial fuels, LPG and lower seasonal uptake in heating oil due to a milder winter.

China’s demand shows the country saw an average of 16.4 million barrels a day in the last quarter of 2023 – 100,000 barrels a day above J.P. Morgan estimates.

Investors and analysts expect interest rate cuts in major oil-consuming regions and lower oil prices to boost the demand.

The difference between the IEA and OPEC estimates for demand growth this year stands at 1.15 million bpd in 2024 – equivalent to roughly 1% of daily world oil use for oil in the year.

A Reuters survey of 30 economists and analysts forecasts Brent crude to average $84.43 a barrel and U.S. crude to average $78.84 in 2024. [O/POLL]

(Reporting by Seher Dareen in Bengaluru; Editing by Tasim Zahid)

(Reuters) – U.S. oil companies and refiners are likely to face another challenging 12 months in 2024, Bank of America (BofA) analysts wrote in a note on Friday, who expect Brent crude to average $80 per barrel this year.

Crude futures lost over 10% in 2023 in a tumultuous year of trading marked by geopolitical turmoil and concerns about the oil output levels of major producers around the world.

“We expect oil to remain volatile, exacerbated by outsize paper market influence, informed by geopolitics and OPEC policy,” BofA wrote in the note.

The Organization of the Petroleum Exporting Countries and allies, or OPEC+, is currently cutting output by around 6 million barrels per day, representing about 6% of global supply.

According to BofA, the bigger challenge for investors this year is to not underestimate Saudi’s commitment to oil while acknowledging that Brent could remain in a notional $70-$90 band due to non-OPEC output and an uncertain demand outlook.

The brokerage said absolute valuations for the sector, on average, are less compelling than at any time since Covid, following the strong recovery over the past three years.

BofA, however, sees tailwinds from recent dealmaking in the largest U.S. shale field, the Permian basin.

It sees Occidental Petroleum, Exxon Mobil and Chevron among the top picks for 2024.

(Reporting by Arunima Kumar in Bengaluru; Editing by Krishna Chandra Eluri)

By Ahmed Rasheed and Phil Stewart

BAGHDAD/WASHINGTON (Reuters) -The Iraqi government is beginning the process to remove the U.S.-led international military coalition from the country, Prime Minister Mohammed Shia al-Sudani’s office said on Friday.

The U.S. has 900 troops in Syria and 2,500 in Iraq on a mission it says advises and assists local forces trying to prevent a resurgence of Islamic State, which in 2014 seized large parts of both countries before being defeated.

Sudani’s statement came a day after a U.S. strike killed a militia leader in Baghdad, prompting anger among Iran-aligned groups which demanded the government end the presence of the coalition in Iraq.

“Government is setting the date for the start of the bilateral committee to put arrangements to end the presence of the international coalition forces in Iraq permanently,” a statement from the prime minister’s office said.

The committee would include representatives of the military coalition, a government official said.

The U.S. military launched Thursday’s strike in retaliation against recent attacks on U.S. personnel, the Pentagon said.

Iran-aligned militia groups in Iraq and Syria oppose Israel’s campaign in the Gaza Strip and hold the U.S. partly responsible.

Iraqi PM Sudani has limited control over some Iran-backed factions, whose support he needed to win power a year ago and who now form a powerful bloc in his governing coalition.

“We stress our firm position in ending the existence of the international coalition after the justifications for its existence have ended,” Sudani was quoted as saying in the statement.

Islamic State claimed responsibility on Thursday for two explosions in Iran that killed nearly 100 people and wounded scores at a memorial for top commander Qassem Soleimani.

A political adviser close to the Iraqi prime minister said Sudani was falling under huge pressure from powerful Shi’ite parties close to Iran seeking to end the U.S. presence in Iraq and his recent statement was aimed at “appeasing angry parties within the governing Shi’ite coalition against the United States”.

Still, it was unclear if Baghdad’s announcement on Friday was mainly posturing for internal, political purposes or if the newly announced committee would truly set into motion an inexorable process to end America’s military presence in Iraq, a longtime goal of Iran and groups Iran supports.

U.S. PRESENCE

U.S. President Joe Biden’s administration had initially avoided any response to wave after wave of attacks in Iraq due to fears about a political backlash there, U.S. officials told Reuters, speaking on condition of anonymity.

But Iraq’s failure to rein in the militia amid escalating attacks against American personnel, including mortar fire against the U.S. embassy compound last month, appears to have pushed Washington into a more aggressive approach.

The U.S. strike in Baghdad on Thursday targeted Mushtaq Jawad Kazim al-Jawari, who the Pentagon said was a leader of an Iran-backed terrorist group involved in planning and carrying out attacks against American personnel.

The Pentagon declined to respond to Iraqi government comments suggesting he was part of its security forces, which include formal, legitimate institutions like the police and the Army.

The Iraqi government said the killed commander was part of the Popular Mobilisation Forces (PMF), a group of many mainly Shi’ite Muslim armed groups formed in 2014 to fight Islamic State and subsequently recognised as an official security agency by Iraq’s government.

In a sign that U.S. military sought to publicly acknowledge efforts by Iraq’s formal security forces to address attacks against U.S. personnel, its Central Command thanked Iraq’s police for their Jan. 3 discovery of a land-based cruise missile that a U.S. official said was aimed at American troops in the country.

“The Coalition is appreciative of the efforts of the legitimate security forces in Iraq for their efforts to prevent future attacks,” it said in a post on social media platform X.

The Pentagon did not respond to requests for comment following the announcement from Sudani’s office, referring journalists instead to comments on Thursday by the top U.S. military spokesperson calling Iraq a “valued partner.”

“We will continue to consult closely with the Iraqi government about the safety and security of U.S. forces. In the meantime, we will continue to stay very focused on that Defeat ISIS mission,” Major General Patrick Ryder told a news briefing on Thursday.

(Reporting by Ahmed Rasheed; Writing by Tala Ramadan; Editing by Nick Macfie and Toby Chopra)

By Johann M Cherian and Shristi Achar A

(Reuters) – The benchmark S&P 500 and the Nasdaq rose on Friday after services sector data pointing to a weaker economy raised bets of faster interest-rate cuts this year, hours after robust jobs data doused expectations of rapid easing.

Financial stocks and big tech companies accounted for most of the gains, with Bank of America and JPMorgan Chase rising between 0.5% and 2%, while Amazon.com, Nvidia and Microsoft edged up between 0.7% and 2.7%.

An Institute for Supply Management (ISM) survey showed services sector activity, which accounts for more than two-thirds of the economy, fell to 50.6 in December from 52.7 in the previous month. Economists polled by Reuters had forecast 52.6.

The yield on the benchmark U.S. Treasury 10-year note, reflecting interest rate expectations, pared gains after the data and was last at 3.998%. [US/]

Markets had initially scaled back bets for a March rate cut after a Labor Department report showed U.S. employers hired more workers than expected in December, while raising wages at a solid clip.

Traders now see a 71% chance of at least a 25-basis point cut in March, up from nearly 55% earlier in the day, according to the CME Group’s FedWatch tool.

“The name of the game with the numbers today is that employment, it’s weaker than advertised when you take into account the revisions,” said Thomas Hayes, chairman at Great Hill Capital.

“And on ISM non manufacturing data, it came in lower than estimated as well and that keeps the Fed cuts sooner rather than later on the table and that’s what the market likes.”

Financial stocks led gains among the 11 S&P 500 sectors with a 0.6% advance, notching an over 1-1/2-year high.

The S&P 500 was still on track for its worst weekly performance since late October as investors cashed in after a nine-week winning streak driven by bets that aggressive rate cuts were imminent.

The Nasdaq was on course for its worst week since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.

At 11:53 a.m. ET, the Dow Jones Industrial Average was up 30.49 points, or 0.08%, at 37,470.83, the S&P 500 was up 18.06 points, or 0.39%, at 4,706.74, and the Nasdaq Composite was up 62.57 points, or 0.43%, at 14,572.87.

Applied Therapeutics tumbled 36.8% after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.

Palantir Technologies lost 2.1% after Jefferies downgraded the data analytics firm to “underperform” on high stock valuations.

Peloton jumped 11.1% after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership.

Later in the day, investors will parse remarks by Richmond Fed President Thomas Barkin, a voting member this year.

Advancing issues outnumbered decliners by a 2.21-to-1 ratio on the NYSE and by a 1.16-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and no new lows, while the Nasdaq recorded 33 new highs and 52 new lows.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers hired more workers than expected in December while raising wages at a solid clip, casting some doubt on financial market expectations that the Federal Reserve would start cutting interest rates in March.

There were, however, some cracks in the closely watched employment report from the Labor Department on Friday. The economy added 71,000 fewer jobs in October and November than previously reported. While the unemployment rate held at 3.7% last month, that was because 676,000 people left the labor force, almost erasing all the gains in participation since February. Household employment fell sharply and the workweek was on average slightly shorter than in November.

Nonetheless, the report indicated that the economy avoided a recession last year and would likely continue to grow through 2024 as labor market resilience supports consumer spending.

“A gradual labor market cooldown remains in place,” said Scott Anderson, chief U.S. economist at BMO Capital Markets in San Francisco. “However, the lingering labor market resilience and strength in wage growth could keep the Fed on the sidelines for longer than the markets currently expect.”

Nonfarm payrolls increased by 216,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls rising by 170,000 jobs. The economy added 2.7 million jobs in 2023, a sharp step-down from the 4.8 million positions created in 2022.

That reflected cooling demand in the economy following 525 basis points worth of rate hikes from the U.S. central bank since March 2022. Roughly 100,000 jobs per month are needed to keep up with growth in the working age population.

Government hiring as state and local authorities try to bring education staffing back to pre-pandemic levels led the rise in employment last month, with 52,000 jobs added.

Government payrolls growth averaged 56,000 jobs per month in 2023, more than double the average monthly gain of 23,000 in 2022. Employment in the healthcare sector increased 38,000, spread across ambulatory healthcare services and hospitals. Unseasonably mild weather boosted hiring at construction sites, with payrolls in the industry rising 17,000.

Leisure and hospitality employment gained 40,000. Employment in the industry is below levels seen before the COVID-19 pandemic by 163,000. Retail employment rose 17,400.

Professional and business services payrolls rose 13,000, but temporary help services shed another 33,300 positions. Employment in the sector, seen as a harbinger for future hiring, has declined for 11 straight months.

Manufacturing jobs increased 6,000. But employment in the transportation and warehousing industry fell 22,600.

The labor market generally remains tight, with 1.40 job openings per every unemployed person in November. That is feeding through to wages, which remain elevated.

Average hourly earnings rose 0.4% in December, matching the prior month’s gain. That raised the year-on-year increase in wages to 4.1% from 4.0% in November.

Wage growth is well above its pre-pandemic average and the 3-3.5% range that most policymakers view as consistent with the Fed’s 2% inflation target.

Financial markets initially reduced the probabilities of a March rate cut to around 53% but later boosted them to about 65% as traders digested the mixed employment report. Attention now shifts to December’s consumer inflation report, scheduled to be published next Thursday.

Stocks on Wall Street were mixed. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

SOFT HOUSEHOLD DETAILS

The Fed held its policy rate steady in the current 5.25%-5.50% range last month and policymakers signaled in new economic projections that the historic monetary policy tightening engineered over the last two years is at an end and lower borrowing costs are coming in 2024.

There was an increase in the share of industries reporting job growth last month, helping to assuage concerns that hiring was too concentrated in a few sectors.

With December’s employment report, the government incorporated annual revisions to the seasonally adjusted household survey data, from the which the unemployment rate is derived, for the past five years.

The revisions had little impact on the jobless rate or the labor force participation rate. The unemployment rate has risen from a five-decade low of 3.4% in April amid an influx of people into the labor force, some of it tied to a rise in immigration.

But the trend reversed in December, with 676,000 people leaving the workforce. As a result the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.5%. That was the lowest level since February and was down from 62.8% in November. The prime working-age participation rate was the lowest since March. 

Both women and men saw a drop in participation, which also fell for foreign-born and American-born workers. Some economists speculated that year-end retirements accounted for the decline in both household employment and the workforce.

“It looks like monthly volatility may have played a role, but we won’t know for sure until next month’s release,” said Daniel Vernazza, chief international economist at UniCredit Bank in London.

Household employment plunged 683,000. It is, however, very volatile. The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, fell to a one-year low of 60.1% from 60.4% in November.

More people worked part-time for economic reasons, with the number increasing 217,000. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, rose to 7.1% from 7.0% in November.

“The labor market is not as tight as you think,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles. “I am still expecting the Fed to cut rates at least a couple of times in the first half of the year.”

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

By Herbert Lash and Naomi Rovnick

NEW YORK/LONDON (Reuters) -Bond prices and a gauge of global equity performance rose on Friday after a surprisingly strong U.S. employment report gave investors confidence the Federal Reserve can engineer a “soft landing” for the U.S. economy.

U.S. employers hired more workers than expected in December while raising wages at a solid clip, which prompted markets to dial back expectations the U.S. central bank would start cutting interest rates in March.

That outlook initially was viewed negatively and added to the New Year’s hangover for equity markets that had surged late last year.

But stocks on Wall Street rebounded, helping lift MSCI’s all-country world index 0.42% and prices of Treasuries, which move inversely to their yields, also rebounded.

The U.S. jobs report was “a sizable positive surprise that indicated the domestic economy continues to do well and expand,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“At least for now, it reversed the profit-taking that the market has experienced during this first week of the year.”

The Fed is hoping to drive inflation back down to its 2% target without triggering a recession or sharp rise in unemployment, a scenario dubbed the “soft landing” by policymakers and financial markets.

The yield on the benchmark 10-year note fell 1.1 basis points to 3.980% and the dollar index, a measure of the U.S. currency against six peers, slid 0.32%. The euro rose 0.29% to $1.0975.

On Wall Street, the Dow Jones Industrial Average rose 0.3%, the S&P 500 gained 0.65% and the Nasdaq Composite added 0.75%. In Europe, the pan-regional STOXX 600 index lost 0.14%. The blistering rally for equity markets at the end of 2023 was based on expectations that the Fed, alongside significant easing by the European Central Bank, would cut interest rates six times this year.

The monthly nonfarm payrolls report showed the U.S. economy added 216,000 new jobs in December. Economists polled by Reuters had expected a gain of 170,000.

The jobless rate held steady at 3.7%, down from most forecasters’ expectations for it to rise, prompting concerns for some investors that the Fed’s long battle against inflation may have further to run.

Future labor demand is very soft and every other piece of the unemployment report is pointing in a downward direction, said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities in New York.

The number of private wage and salary workers has declined, overall aggregate hours, a proxy for GDP, haven’t grown for three months in a row and temporary employment has been down for 11 straight months, he said.

“You take the headline numbers, which are a little bit better than expected, and people are drawing the incorrect conclusion of the report is strong,” LaVorgna said.

Euro zone inflation data on Friday showed prices in the currency bloc rose 2.9% on a year-on-year basis in December, up from 2.4% in November and potentially creating less urgency for the ECB to start cutting borrowing costs from record highs.

Traders on Friday saw about a 74% chance of the Fed starting to lower its benchmark overnight interest rate from the current 5.25%-5.50% range in March, according to the CME Group’s FedWatch Tool, slightly higher than a week ago.

Elswhere in financial markets, Japan’s Nikkei added 0.3% as exporters got a boost from a weaker yen. A deadly New Year’s Day earthquake in Japan has also forced wagers for the ultra-dovish Bank of Japan to tighten monetary policy this month off the table.

Spot gold added 0.5% to $2,054.39 an ounce.

Oil markets remained volatile as expectations of weak demand from China clashed with concerns about additional Red Sea supply disruptions following attacks on ships by Yemen’s Iran-backed Houthis.

U.S. crude recently rose 2.01% to $73.64 per barrel and Brent was at $78.70, up 1.43% on the day.

(Reporting by Herbert Lash, additional eporting by Naomi Rovnick, Kevin Buckland and Ankur Banerjee; Editing by Ros Russell, Mark Potter, Emelia Sithole-Matarise and Paul Simao)