A “Now Hiring” sign is displayed in a retail store in Manhattan on January 05, 2024 in New York City.
Spencer Platt | Getty Images
Hot job market
The US labor market added 216,000 jobs in December. That’s far more than the 170,000 that economists surveyed by Dow Jones had expected, and the downwardly revised 173,000 jobs added in November. The unemployment rate stabilized at 3.7%, defying estimates for a 10 basis point rise. Meanwhile, average hourly earnings rose 4.1% compared to the previous year, higher than expectations of 3.9%.
Losing week
US stocks rose slightly on Friday, but were unable to reverse the weekly decline. Treasury yields rose for a second day, with the 10-year yield closing at 4.051%. The European Stoxx 600 index fell by 0.27%. Retail stocks fell 1.1%, topping the sector’s losses, after data showed a decline in German retail sales of 2.5% during the month, which is much more than estimates that indicated a decline of 0.1%.
Grounded aircraft
The US Federal Aviation Administration has ordered a temporary grounding of Boeing’s 737 MAX 9 aircraft, meaning airlines will no longer be able to fly select Boeing models. This directive comes after a piece of the plane exploded in the middle of an Alaska Airlines flight, leaving a large hole on the side of the plane.
Possible lawsuit for Apple
Apple can’t catch a break. After its stock was downgraded by Barclays and Pepper Sandler, the tech giant will likely face an antitrust lawsuit by the US Department of Justice, according to a report by The New York Times. The lawsuit could target how the Apple Watch works exclusively with the iPhone, as well as the company’s iMessage service, which excludes non-Apple devices.
(PRO) Numbers to watch
The US CPI report will be released on Thursday this week, and will be the main catalyst for the markets as investors evaluate whether the US Federal Reserve is getting closer to its target of keeping inflation at 2%. But don’t neglect Friday, which is packed with earnings reports for major banks like JPMorgan Chase, Citigroup, and Bank of America.
The headline number for the US jobs report is undoubtedly staggering – 216,000 new jobs in December, compared to 170,000 expected. The unemployment rate defied expectations for a decline, while average hourly earnings were also above estimates.
Data indicates that the US labor market remains hot despite the 11-fold interest rate hike implemented by the Federal Reserve.
But the numbers are not so drastic that raising interest rates might be back on the table. Look closely and you’ll find pockets of weakness in the report.
It is likely that the headline number, although it beat expectations, will not convince the Fed to resume raising interest rates.
CNBC’s Jeff Cox noted, “While the Dow Jones estimates call for a nonfarm payroll gain of 170,000, Art Hogan, chief market strategist at B. Riley Financial, said the acceptable range is actually between 100,000 and 250 thousand”.
Also consider how the jobs numbers for October and November were revised downward, indicating a weaker than expected labor market in the fourth quarter. When viewed on an annual basis, 2023 saw job growth of 2.7 million jobs, significantly lower than the 4.8 million jobs added in 2022.
The theme of continued – but slowing – growth also emerged in the December ISM Services Index, which measures business activity, such as price and inventory levels. The reading came in at 50.6%, indicating growth in the services sector, but this is about two percentage points below expectations as well as the November reading.
Perhaps that’s why stocks were able to post small gains on Friday, despite the headline jobs number shock.
The S&P 500 rose 0.18%, the Dow Jones Industrial Average rose 0.07%, and the Nasdaq Composite rose 0.09%.
But these marginal increases did not prevent the major indices from recording their first negative week in 10 days. Over the week, the S&P fell 1.52%, the Dow lost 0.59% and the Nasdaq fell 3.25%, its biggest drop since September.
Investors hoping for a positive stimulus to the markets will keep their fingers crossed, Hopefully the December CPI report will come in cooler than expected.
— CNBC’s Jeff Cox contributed to this report.