The so-called “small non-agricultural” ADP employment report and the number of initial jobless claims last week both showed that the U.S. job market is strong, causing investors to worry about the Fed’s firm hawkish stance and continuing to raise interest rates. Thursday (5th) opened lower.
Before the deadline, the Dow Jones Industrial Average fell more than 300 points or nearly 1%, the Nasdaq Composite Index fell more than 120 points or nearly 1.2%, the S&P 500 Index fell nearly 1%, and the Philadelphia Semiconductor Index fell nearly 1.2%.
The U.S. ADP employment report, known as “small non-agricultural”, showed that private employment increased by 235,000 in December last year, far exceeding market expectations of 150,000 and the previous value of 127,000. ) raised interest rates to try to cool inflation, but the labor market was unexpectedly strong.
At the same time, the number of Americans claiming unemployment benefits last week also confirmed that the labor market is hot. According to the data from the Labor Department, the number of people claiming unemployment benefits last week reported 204,000, which was lower than the market expectation of 225,000, and the previous value was revised to 22.3 million people.
After the release of the above two employment data, investors’ expectation that the Fed will continue to raise interest rates has been exacerbated.
The Fed has said the tight labor market gives them room to keep trying to stem rising prices, while officials remain concerned that financial conditions may be too loose to effectively curb growth, even after the Fed embarked on its most aggressive monetary tightening in 40 years.
Minneapolis Federal Reserve Bank President Neel Kashkari (Neel Kashkari) said recently that the Federal Reserve (Fed) should continue to raise interest rates in the next few meetings until it is determined that inflation has peaked. It stopped after the rate hit 5.4%.
Next, the Labor Department will announce the non-agricultural employment report for December last year on Friday (6th). This economic indicator is undoubtedly more important. Only a sharp decline in the employment population and a significant increase in the unemployment rate may force the Fed to completely soften its hawkish stance to ease recession fears.
The minutes of the Fed’s December meeting released a few days ago showed that all officials agreed that the Fed should slow down its aggressive pace of rate hikes, but emphasized that slowing down the pace does not weaken its commitment to real price stability.
As of 22:00 on Thursday (5th) Taipei time: Focus stocks:
Walgreens Boots Alliance (WBA-US) fell 5.55% in early trading to $35.41 per share
Shares of U.S. pharmacy chain Walgreens Boots Alliance fell about 2% before the market opened, despite the company’s latest earnings report, which topped Wall Street analysts’ expectations for revenue. At the same time, the company also raised its full-year revenue forecast, partly due to the acquisition of Summit Health, a specialty medical organization, by its U.S. healthcare unit.
Coinbase (COIN-US) fell 9.60% in early trading to $34.08 per share
The stock price of cryptocurrency exchange Coinbase fell more than 6% before the market, after Wall Street investment bank Cowen downgraded the company’s stock rating, citing the sluggish economic environment and investors’ lingering shadow of FTX. Coinbase has reached a $100 million settlement with the New York Department of Financial Services over lack of anti-money laundering standards.
American Express (AXP-US) fell 1.80% in early trade to $147.33 per share
Shares of American Express fell nearly 1.5% premarket after investment bank Stephens downgraded the stock to underweight from equal weight. Analysts at the bank feared that Amex’s buffer capacity would decline, so they lowered their price target on the stock from $146 to $134 a share and lowered their forecast for earnings per share this year by 8%.
Today’s key economic data: U.S. ADP reported 235,000 new jobs last December, expected 150,000, previous value 127,000 U.S. initial jobless claims reported 204,000 last week, expected 225,000, previous value 223,000 U.S. continued last week The number of people receiving unemployment benefits reported 1.694 million, expected to be 1.708 million, and the previous value was 1.718 million. The final value of the U.S. services PMI in December last year was expected to be 44.4, and the previous value was 46.2.
Equity investors hoping for a respite in the new year after a brutal 2022 may be disappointed, said Michael Kantrowitz, chief investment strategist at Piper Sandler. He predicts that the S&P 500 index will fall 16% this year to 3,225 points. If this prediction comes true, it will be the first time since 2022 that the S&P 500 index has experienced double-digit declines for at least two consecutive years, and it will also be the first time in nearly a century. Fifth time since.
Morgan Stanley fixed income strategist Jim Caron said recently that the market underestimated how much the Fed is willing to raise interest rates in response to the worst inflation in U.S. history. Traders continue to underestimate the path of future policy tightening even as Fed officials have forecast interest rates will rise above 5% in 2023. Barring a dramatic event, the Fed will keep interest rates at 5.25% for a while to ensure inflation can be contained.