The futures market was well in the green this morning ahead of the November ADP payrolls report. This release showed that jobs had increased by 103,000, which was well lower than analysts’ expectations of 120,000 new jobs. ADP also revised the October job gains lower. Hiring slowed considerably at small businesses, but jobs gains were much higher at medium and larger businesses. Trade, transportation, and utilities were the strongest hirers, followed by the education industry. On the other hand, the leisure and hospitality sector lost 7,000 jobs, which is a significant change from strong job growth there following the pandemic. Manufacturing jobs were also down 15,000 despite a resumption of work following strikes at the major automakers. Wages increased 5.6%, year over year, for job stayers and increased 8.3%, year over year, for job changers. Overall, these figures were quite a bit lighter than in prior months. All told, this report indicates a gradual slowing of the economy, consistent with broader investor sentiment, and did not change the futures prices, suggesting a strong start to the trading day.
The stock market started weak yesterday, falling after a report showed that job openings declined by 600,000 during October. Additionally, stocks have largely trended higher in recent weeks, and several have reached overbought conditions, causing some traders to lighten their positions. However, investors notably bought shares of smartphone maker Apple (AAPL), whose market cap breached $3 trillion yesterday. Traders are expecting stronger smartphone sales this holiday season. Though the day started weakly, the broader market indices largely recovered through the day and ended not far from breakeven levels. Overall, the S&P 500 fell two points (down 0.06%), and the Dow Jones Industrial Average declined 80 points (down 0.22%). The NASDAQ increased 44 points (up 0.31%), given its higher weight in technology stocks, which were amongst the best performers yesterday. Energy issues were amongst the weakest performers, however. Market breadth was decidedly negative, with decliners outpacing advancers by a 2.3-to-1.0 ratio.
In commodity news, oil prices fell yesterday as demand concerns hit the broader market. Oil prices have fallen considerably in recent weeks, as geopolitical risks related to the war in the Middle East have not translated to lower shipments. Last week, the Organization of Petroleum Exporting Countries (OPEC) agreed to cut production through the first quarter of 2024. Elsewhere, U.S. Treasury bond yields were largely higher yesterday. Short-term rates remain higher than those with longer durations. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell yesterday as traders priced in less future volatility.
Later this week, several economic reports will be released. These include initial jobless claims and wholesale inventories on Thursday, while the U.S. unemployment report for November and the University of Michigan’s Consumer Sentiment Index will be released on Friday. Elsewhere, several dozen companies will report third-quarter results in the days ahead, though these are generally smaller companies. - John E. Seibert III
At the time of this article’s writing, the author did not hold any positions in the companies mentioned.
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