Markets notched their first session in the green today — the one-year anniversary, by the way, that the Dow and S&P 500 hit all-time highs — even after Fed minutes from the last FOMC meeting came out that reiterated its “higher for longer” interest rate stance. Session highs were directly prior to the minutes’ release, but it didn’t take long for markets to recover. The Dow finished +0.40%, the S&P 500 +0.75%, the Nasdaq +0.69% and the small-cap Russell 2000 was +0.48% on the day.
The Fed minutes
reflected the meeting concluded December 14th of last year, where a 50 bps hike to 4.25-4.50% marked a slowdown in increases for the first time since May. It was also the first time the Fed funds rate had emerged above 4% since December 2007/January 2008. No voting members were recorded as favoring rate cuts throughout the full-year 2023, with Minneapolis Fed President Neel Kashkari suggesting the Fed funds rate go to 5.25-5.50% and stay there.
For those light on math skills, that’s a full 100 bps higher, +1%, than where we are right now. Thus, this more firmly suggests another 50 bps hike on February 1st, with two more 25 bps hikes or one more 50 bps move afterward. And then… wait, basically, until things fall apart. Perhaps we’ll not have to wait as long as the Fed currently predicts — economic prints from today through the end of the week may have something to say about this.
ISM Manufacturing
for December came in lower month over month, as expected: 48.4% was the headline number, below the unrevised 49.0% from the previous month, and remaining below the 50% threshold that determines expansion from contraction. Aside from these last two prints, ISM Manufacturing hasn’t posted beneath 50% since the pandemic.
JOLTS
numbers for November also came out this morning, putting up numbers that were flat month over month, but higher than before: 10.46 million job openings was the headline, roughly equating the upwardly revised 10.51 million for October. Expectations were for 10.1 million job openings in November. We imagine the last month-plus of layoffs announced by some of the biggest tech firms to start to take a bigger chunk out of these numbers, going forward.
Job Quits
, on the other hand, were revised lower for October, from 4.3 million originally reported to 4.0 million now. The November print, then, has gone higher: 4.2 million, or +2.7%, though lower than the estimated 4.3 million, or +2.6%, previously. These adjustments might read complex, but ultimately, American quitting their jobs have cooled way down from +3.0% of the workforce a year ago.
Bottom line — and this is ahead of
ADP’s
ADP
private-sector payrolls out tomorrow morning and nonfarm payrolls reported on Friday — we are seeing the labor market cooling overall. Thus far, they’ve been the product of less hiring — not more layoffs — but we expect to see this change over time. Roughly a dozen big-name companies have already announced plans to slash their workforce, including
Salesforce.com
CRM
this morning.
The latest possible wrinkle in the early 2023 fabric might be coming from Washington DC, as the 118th House of Representatives has yet to elect a Speaker of the House, with California Rep. Kevin McCarthy having lost his sixth vote to secure the position. This has already compelled some bank analysts to suggest keeping an eye on the pending raise to the debt ceiling. The last time a Congress defied raising it, back in 2011, the U.S. economy suffered rating decreases for the first time in modern history. We hope this does not portend a second.
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