No Santa Rally but Average Hourly Earnings Save the Day (January 6 Market Recap)
Indices
- Dow 33,630, +484 or +1.5%.
- Nasdaq 10,569, +104 or +0.99%.
- S&P 3,895, +56 or +1.5%.
- USD10Y 3.569%, -31.0bp or -8.0%.
- WTI Crude $73.73/bbl, -$6.43 or -8.0%.
No Santa Rally but Average Hourly Earnings Save the Day
The week was staggering along without any real purpose until Friday’s economic data was released. While December Non-Farm payrolls were stronger than expected with 223,000 jobs created vs 200,000 expected, it was a less well-known data point, average hourly earnings (AHE) that sent the markets soaring. The Fed’s singular focus on the tight labor market is not yet showing results but its efforts to decrease wage inflation does appear to be taking effect. Month over month AHE were up only +0.3% vs +0.4% expected. The year-over-year figure was even better, falling to +4.6% vs +5.0% expected.
Markets wildly cheered this data assuming the Fed will continue to slow the size and number of their rate increases. In fact, the probability of a 25bp rate hike in February rose to 75% vs 62% the day before.
Next Week
Another key inflation data point will be revealed on Thursday with the release of December’s Headline Consumer Price Index which is expected to decline from +7.11% to +6.5%, which could provide yet another spark to the market.
Economic Calendar
- Monday – New York Fed 1 and 5-year Inflation Expectations.
- Tuesday – N/A.
- Wednesday – N/A.
- Thursday – Initial Jobless Claims, December Consumer Price Index (CPI).
- Friday – January University of Michigan Preliminary Consumer Sentiment, January 1 and 5-year University of Michigan Consumer Inflation Expectations.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
January 6 Daily Trading Recap…
Monday – Markets Closed in Observance of New Years.
Tuesday – Dow -10 to 33,136, Nasdaq -79 to 10,386, S&P -15 to 3,824, USD10Y –8.6bp to 3.793%.
- Six of eleven S&P sectors traded down today, led lower by Energy, Technology, and Consumer Discretionary.
- December S&P U.S. Manufacturing was unchanged from the month prior at 46.2.
Wednesday – Dow +133 to 33,269, Nasdaq +71 to 10,458, S&P +28 to 3,852, USD10Y –8.4bp to 3.709%.
- All eleven S&P sectors traded higher today, led by Real Estate, Materials, and Financials.
- November JOLTS (Job Openings and Labor Turnover Survey) showed a slight decline in available jobs from October, although October’s number was revised higher. Quits remained above 4 million for the eighteenth consecutive month.
- Fed minutes from last month’s meeting showed that none of the nineteen board members expect to cut rates in 2023. Markets are pricing in a 0.25% rate hike in February.
- December ISM Manufacturing showed a contraction at 48.4% vs 48.5% expected.
Thursday – Dow -339 to 32,930, Nasdaq -153 to 10,305, S&P -44 to 3,808, USD10Y +1.1bp to 3.72%
- Ten of eleven S&P sectors traded down today, led lower by Real Estate, Materials, and Tech.
- Jobless claims fell to 204,000 claims vs 225,000 expected and last week’s slightly revised lower print of 223,000 (originally 225,000 claims). Continuing claims fell to 1.69 million.
- December ADP Private Payrolls showed an increase of 235,000 jobs vs only 135,000 expected.
- December S&P U.S. Services PMI was slightly better at 44.7 vs 44.4 expected.
Friday – Dow +700 to 33,630, Nasdaq +264 to 10,569, S&P +87 to 3,895, USD10Y –15.1bp to 3.569%.
- All eleven S&P sectors traded higher today, led Materials, Technology, and Real Estate.
- December Non-Farm Payrolls were better than expected with 223,000 jobs added vs expectations of 200,000 and last month’s 256,000 print.
- December Average Hourly Earnings were lower than expected at +0.3% vs +0.4% expected and the year-over-year number fell to +4.6% vs +5% expected.
- December ISM Services Index was also lower than expected at 49.6% vs 55.1% expected and last month’s 56.5% print.
- December Unemployment fell to 3.469%, the lowest since 1969.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.