As the sun set on the US equity markets on Thursday, investors braced for a significant economic update: the impending December jobs report. The anticipation cast a shadow over Wall Street, with the Nasdaq Composite dipping 0.6% to close at 14,510.3 and the S&P 500 shedding 0.3% to finish at 4,688.7. In contrast, the Dow Jones Industrial Average remained relatively unscathed, with only a slight movement to end at 37,440.3. Among the various sectors, energy stocks experienced the sharpest decline, while health care, financials, and industrials saw gains.
Analysts have been poring over the data, predicting the December jobs report, due Friday, will likely indicate nonfarm payroll growth of 171,000—a decrease from November’s 199,000. This forecast, compiled by Bloomberg, echoes the sentiment of Oxford Economics which anticipates slower job growth and a deceleration in nominal wage growth. Such slowdowns could be the relief the Federal Reserve seeks as it orchestrates a “soft-landing” for the economy, aiming to alleviate services inflation pressures.
On the central bank front, the Federal Open Market Committee has been on an aggressive campaign against inflation, hiking its benchmark lending rate by a substantial 525 basis points since March 2022, with the latest increase occurring in July 2023. Simultaneously, bond yields have been responding, with the US 10-year Treasury yield climbing nine basis points to 4%, and the two-year yield increasing 6.2 basis points to 4.38%.
In employment news that preceded the official release, the ADP National Employment Report revealed that private sector employment surged more than expected in December, suggesting a return to pre-pandemic hiring levels. The report showed an increase of 164,000 jobs versus the 125,000 anticipated, while the previous month’s gains were slightly revised down.
Additionally, weekly applications for unemployment insurance dropped to levels not seen since mid-October, a positive sign for labor market stability. Meanwhile, the US services sector displayed a robust performance with a demand-driven uptick in activity, according to an S&P Global survey, further bolstering the economic outlook.
In the commodities market, West Texas Intermediate crude oil saw a modest decline, shedding 0.4% to settle at $72.38 per barrel. This was amid a significant drawdown in US commercial crude stockpiles, which decreased by 5.5 million barrels, surpassing Bloomberg’s consensus expectations.
Corporate America also made headlines, as shares of Walgreens Boots Alliance took a 5.1% hit after the company decided to slash its dividend to fortify its balance sheet. Despite this, Walgreens posted fiscal results that surpassed expectations. On the flip side, Epam Systems enjoyed a 2.7% boost in share value after an analyst upgrade.
Gold and silver both inched higher, with gold gaining 0.4% and silver 0.3%, affirming their status as traditional safe-haven assets during times of economic uncertainty.
As we await the comprehensive jobs report, these developments offer a mixed picture, with investors balancing cautious optimism against the backdrop of a potentially shifting labor landscape. While the market’s reaction to the comprehensive economic data remains to be seen, there’s no doubt that all eyes are fixed on the labor market’s performance—a critical gauge of the nation’s economic health.
What does this mean for you? Stay tuned to the GazeNow for real-time updates and in-depth analysis, and keep an eye on these market movements to make informed decisions about your investments.
What impact did the anticipation of the December jobs report have on the equity markets? The anticipation of the December jobs report has led to a cautious stance among investors, resulting in the Nasdaq Composite and the S&P 500 closing lower, while the Dow Jones Industrial Average remained relatively steady.
What are analysts expecting from the December jobs report? Analysts, including those from Oxford Economics and surveys compiled by Bloomberg, are expecting the report to show a slower job growth of 171,000 for December, down from the 199,000 gain in November.
How has the Federal Reserve been responding to inflation? The Federal Reserve has aggressively raised its benchmark lending rate by 525 basis points since March 2022 in an effort to combat inflation, with the most recent hike in July 2023.
What did the ADP National Employment Report indicate about private sector employment? The ADP National Employment Report showed that private sector employment increased by 164,000 in December, which was higher than the expected 125,000, suggesting a return to pre-pandemic hiring levels.
How did the commodities market react, especially with crude oil and precious metals? Crude oil saw a slight decline, while gold and silver prices increased, indicating a continued appeal for safe-haven assets amidst economic uncertainty.
Our Recommendations: In light of the recent market activity and the ADP report suggesting robust private-sector employment, we recommend keeping a close eye on sectors showing resilience, such as healthcare and financials, which could offer stability or growth opportunities. As always, diligent research and consideration of personal financial goals are essential.
Market Trends: With key economic indicators sending mixed signals, investors may be wise to adopt a wait-and-see approach until the release of the official jobs report. Depending on the outcome, it may be prudent to re-evaluate positions, particularly in sectors that could be affected by changes in the labor market and Federal Reserve policies.
What’s your take on this? Let’s know about your thoughts in the comments below!