Daily Markets: Jobs Gains, Job Cuts, Wage Inflation - Which Will Investors Track Today?

Today’s Big Picture

Asia-Pacific equity markets closed up across the board today: Australia’s ASX All Ordinaries gained 0.14%, India’s Sensex rose 0.21%, and South Korea’s KOSPI and Japan’s Nikkei advanced 0.38% and 0.40%, respectively. Taiwan’s TAIEX was 0.72% higher and China’s Shanghai Composite gained 1.01% while Hong Kong’s Seng set the pace, up 1.25% led by Retail Trade, and Consumer Durables names. By mid-day trading, European equity indices are middling, with a few markets essentially flat, and U.S. futures point to a muted but positive market open.

Following yesterday’s Federal Reserve December monetary policy meeting minutes that reiterated the Fed’s focus on the tight labor market and wage inflation, we have some potentially conflicting views on the jobs market before stocks begin trading. At 7:30 AM ET, the Challenger Job Cuts report for December was released, registering 43,651 job cuts in December of 2022. Then, at 8:15 AM ET, ADP (ADP) will publish its December Employment Change report which will further shape the market open. The report is expected to show that 150,000 private sector jobs were created during the month, up from 127,000 in November. In our view, it is the often-overlooked data on wage gains that are likely to be far more insightful to investors ahead of tomorrow’s December Employment Report.

As those reports are digested, we could see further movement in equity futures. Soon after the market opens, S&P Global (SPGI) will release its final reading for December U.S. Service Sector PMI data. The flash reading published in December showed a more sluggish 44.4 following November’s 46.2 figure. As today’s ADP data will set the stage for tomorrow’s December Employment Report, S&P’s Service sector findings will provide some discovery for the Institute for Supply Management’s (ISM) Non-Manufacturing Index for December. Tallying those data sets will likely give way to not only revised expectations for Q4 2022 GDP but will also influence how investors see the December quarter earnings season shaping up.

Data Download

International Economy

The Caixin China General Services PMI increased to 48.0 in December from November’s six-month low of 46.7, signaling a softer decline in the sector, and pointing to the 4th straight month of drop, after the country removed its stringent zero-Covid policy.

The S&P Global/CIPS UK Services PMI came in at 49.9 in December, little changed from a preliminary estimate of 50.0 and above November's 48.8, indicating a broad stabilization of activity after two consecutive months of contraction. The UK announced plans to increase public funding in R&D to £20 billion to enhance its position in artificial intelligence, life sciences, quantum computing, financial services, and green technology.

Domestic Economy

As discussed above, today brings the December ADP Employment Change Report and S&P Global’s December report for Service sector PMI.

Markets

U.S. equity markets moved higher yesterday despite the Fed’s December monetary policy meeting minutes that took some wind out of traders’ sails following confirmation that the Fed does not see any rate cuts in 2023. On the day, the Dow gained 0.40%, the Nasdaq Composite rose 0.69%, the S&P 500 advanced 0.75%, and the Russell 2000 closed up 1.25%. Sectors were all positive, except for Energy which ended the day essentially flat, down 0.01%. Interest rate speculation drove optimism in Real Estate, pushing the sector up 2.29%, the day’s biggest gainer, followed by Communication Services (1.87%), Materials (1.74%), and Financials (1.60%). Yesterday saw Tesla (TSLA) break its two-day losing streak, bouncing back 5.12%. Warner Brothers Discovery (WBD) rose 8.81% and Paramount Global (PARA) gained 8.38% despite a research note that calls for reduce ad spend expectations in 2023.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 0.37%
• S&P 500: 0.35%
• Nasdaq Composite: -0.07%
• Russell 2000: 0.64%
• Bitcoin (BTC-USD): 1.50%
• Ether (ETH-USD): 4.73%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, ConAgra (CAG), Constellation Brands (STZ), Helen of Troy (HELE), Lamb Weston (LW), MSC Industrial (MSM), Schnitzer Steel (SCHN), and Walgreens Boots Alliance (WBA) will be among the companies reporting their latest quarterly results. That said, we would caution readers to be on the watch for earnings pre-announcements as we start to ramp up for the fourth quarter earnings cycle.

Amazon (AMZN) will reduce its headcount by more than 18K employees, more significant than the prior projection to cut ~10K roles due to “economic uncertainty.” The company is expected to concentrate cuts on its Amazon Stores and PXT organizations, but other reports indicate cuts could be had at its devices business.

Sharing "the final quarter of the year was exceptionally strong for both our US and European based operations," Inter Parfums (IPAR) lifted its 2022 EPS guidance to $3.60 vs. the $3.40 consensus and issued inline 2023 EPS guidance of $3.70-3$.75 vs. the $3.70 consensus.

Following Advance Micro Devices’ (AMD) keynote that touched on advances in gaming, AI, healthcare, and aerospace applications, CES 2023 formally kicks off today with keynotes from John Deere (DE) and the Consumer Technology Association (CTA). Readers should expect a wave of press releases regarding new products from exhibitors, some of which will hit shelves later this year.

IPOs

As the holiday season continues, the near-term IPO calendar is relatively light with no significant IPOs slated to price this week.

Johnson & Johnson's (JNJ) consumer health division, to be called Kenvue, has filed to raise up to $100 million through an initial public offering.

Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Duck Creek Technologies (DCT) is slated to report its latest quarterly results after equities stop trading today. We would caution readers to be on the watch for earnings pre-announcements as we start to ramp up for the fourth quarter earnings cycle.

Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, January 6

• Japan: Au Jibun Bank Japan Services PMI - December
• US: Employment Report – December
• US: Factory Orders – November
• US: ISM Non-Manufacturing Index

Thought for the Day

“Everything is funny, as long as it’s happening to someone else.” ~ Will Rogers

Disclosures

• John Deere (DE), Lamb Weston (LW) are constituents of the Foxberry Tematica Research Sustainable Future of Food Index
• Advanced Micro Devices (AMD) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Walgreens Boots Alliance (WBA) is a constituent of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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