The stock market futures have wobbled around a flat opening this morning. The jobs report from payroll processor Automatic Data Processing (ADP) showed that private payrolls rose by 127,000 in November, which was well below expectations. That number means hiring slowed to its weakest point since January of 2021. The ADP Chief Economist, Nela Richardson, stated that “our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains.” The Leisure and Hospitality sector was the top area for hiring (up 224,000 jobs), while losses occurred in manufacturing (down 100,000) and professional and business services (down 77,000).
Other significant economic information will be released after the opening bell, including the Chicago Purchasing Managers Index (PMI). Later in the day, the Federal Reserve comprehensive Beige Book (formally known as the Summary of Commentary on Current Economic Conditions and issue eight times a year by the Fed) will be released, and U.S. Federal Reserve Chairman Jerome Powell will give remarks at the Brookings Institution. Traders will be looking to see what he says about the state of the economy and the future of Federal Reserve interest-rate policy.
The stock market had mixed results yesterday as economic data were released. Consumer Confidence slipped slightly to 100.2, and inflationary expectations rose for fuel and food. Overall, the S&P 500 fell 6 points, the NASDAQ finished down 66 points, and the Dow Jones Industrial Average eked out a gain of 3 points.
Still, advancers outpaced decliners by a 1.4-to-1.0 ratio. The real estate investment trusts group (or REITs) were among the best performers, aided by a smaller-than-expected decline in the Case-Shiller Home Price Index in September (down 1.2% month over month). Still, year-over-year figures showed home price increases slowing to 10.4%, suggesting peak housing inflation is in the rearview mirror. Meantime, technology equities were among the weakest performers.
In commodity news, oil prices bounced higher yesterday as traders speculated that China could ease some of its COVID-19 restrictions in response to protests in that country, which might increase worldwide demand for petroleum.
Elsewhere, U.S. Treasury bond yields traded to mixed results, with short-term interest rates rising and long-term interest rates falling. The yield curve remains heavily inverted, with short-term rates trading higher than long-term ones, which sometimes portends a coming recession. The Chicago Board Options Exchange Volatility Index, or VIX, fell as demand for options protection declined.
Several economic reports will be released in the days ahead. These include initial jobless claims, the core- and non-core Personal Consumption Expenditures Price Index for October, the S&P U.S. Manufacturing Final Purchasing Managers Index for November, and Institute for Supply Management Manufacturing Index on Thursday. Several of these reports will give insight into inflation. Additionally, nonfarm payrolls and the unemployment rate for November are on the docket for Friday.
Additionally, several dozen companies will report earnings results in the days ahead, including Dow-30 component Salesforce (CRM), after the close today. Overall, we think most eyes will be on the inflation-related data in the days ahead. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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