ND&S Weekly Commentary 1.8.24 – Resilient Job Market (with caveats…)

On a short week, the major stock indexes snapped a nine-week winning streak as a result of a better-than-expected December Jobs report. Investors were concerned that positive economic data would delay interest rate cuts by the Federal Reserve.

The S&P 500 lost 1.50%, the Dow Jones Industrial Average fell 0.56% and the tech-heavy Nasdaq slid 3.23%. Foreign markets were also weak with developed markets (MSCI-EAFE) down 1.26% and emerging markets (MSCI-EM) lost 2.09%. Gold closed the week at $2.056/oz. – down 0.97% on the week. The price of oil ($/bbl) closed at $73.91, up 3.2% from the previous week.

On the economic front, December payrolls rose by 216,000 beating the estimate of 164,000. The unemployment rate remained at 3.7%, slightly below the estimate of 3.8%. The average hourly earnings growth slipped to 3.9% from 4% in November. Digging deeper into the report, the DOL reduced payroll estimates by 71,000 jobs from previous months … this has now happened in ten out of the last eleven months. In 2023, nearly half of all jobs added were in the government and health care sectors, areas heavily funded by the government which is something we will continue to monitor moving forward. Other economic releases included the December ISM manufacturing index which rose seven-tenths of a point, but still contracted below the neutral 50 level for the fourteenth straight month. The ISM service sector index was down 2.1 points to 50.6, below estimates.

Bond yields bounced higher in response to some hawkish FOMC member comments and the better-than-expected December jobs report. Federal Reserve voting members are scheduled to speak at several different conferences this week and it would not be surprising to see them throw some cold water on expected rates cuts in 2024. The 10-year Treasury closed the week at 4.04%, up from 3.88% the previous week.

The Consumer Price Index (CPI) will be released on Thursday and will show whether the favorable changes in inflation continued into December. The major banks will open the quarterly earnings season this week.

Wishing you and yours a happy, healthy, and prosperous New Year.

“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”Thomas Edison