“The potential of artificial intelligence to exponentially boost productivity in the coming years remains a strong narrative,” affirmed Yung-Yu Ma of BMO Wealth Management. “The economy’s resilience, adaptability, and penchant for innovation in 2023 are anticipated to serve as pillars guiding us through 2024.”
Markets responded with a 1.5% surge in the Nasdaq 100, halting a three-day decline in the S&P 500. Treasury movements were modest, witnessing a slight uptick in the 10-year yield to approximately 4.15%. Meanwhile, the yen soared over 2% following hawkish cues from the Bank of Japan, while the dollar experienced a downturn.
Krishna Guha of Evercore dismissed immediate expectations of a surprise hike by the BOJ in December. “January appears a more plausible timeline,” he remarked. “Although the trajectory aligns, today’s tactical trades might have overreached.”
Amid a week brimming with labor market indicators, data indicated a significant decline in ongoing applications for US jobless benefits, marking the most substantial drop since July. However, continuing claims persist near a two-year high, signaling a cooling labor market. This data precedes the impending government report for November, which is projected to display increased hiring alongside an unemployment rate holding steady at 3.9%.
The anticipation leading up to the upcoming jobs report is palpable among market experts. Liz Young at SoFi notes a subtle yet distinct shift in the labor market, observing a slight rise in unemployment and a steady increase in ongoing jobless claims. She underscores the delicate balance needed to address these shifts without causing further disruption—a necessary cooling off without freezing the situation altogether.
Jose Torres of Interactive Brokers anticipates the jobs report to offer more insights into a softening labor market, potentially easing wage pressures and staffing challenges for employers. However, the market’s reaction will hinge on whether investors interpret this data as a stepping stone toward a March rate cut or as a harbinger of adverse effects on consumer spending and economic slowdown.
Vanguard’s Andrew Patterson forecasts an addition of 160k jobs in November, aligning with broader indicators signaling a slowing labor market. He notes recent below-expectation wage growth but suggests a possibility of upside risks based on private-sector wage indicators, cautioning that any spike may be short-lived.
Craig Erlam at Oanda emphasizes the significant role of the wages component in tomorrow’s jobs report, marking it as a crucial factor in the current economic landscape.
The recent stock rally, fueled by optimism around disinflation and potential rate cuts next year, appears juxtaposed against lingering volatility in rate markets. Marko Kolanovic of JPMorgan Chase & Co. warns that sustaining market rallies might necessitate substantial rate cuts by central banks, an action he doesn’t foresee without severe market declines or economic stagnation. He suggests investors consider cash or bonds over stocks given the current scenario.
Goldman Sachs strategists express caution, stating that US stocks might be overly optimistic about economic growth, leaving them susceptible to macro shocks. Bank of America Corp.’s quant strategists, however, project potential growth for the S&P 500 next year, countering concerns about narrow market breadth and expecting a more diversified leadership beyond major tech players.
In the corporate sphere, notable updates include Broadcom Inc.’s slower sales growth post-acquisition, Lululemon Athletica Inc.’s underwhelming fourth-quarter guidance, and significant developments at Tesla Inc., Dish Network Corp., JetBlue Airways Corp., Dollar General Corp., and SpaceX.
This week holds key events like Germany’s CPI, Japan’s household spending and GDP data, along with influential speakers and the highly anticipated US jobs report, all against a backdrop of fluctuating movements across stocks, currencies, cryptocurrencies, bonds, and commodities.
As the market navigates these crosscurrents and varied forecasts, it’s a pivotal moment characterized by both optimism and caution, underscoring the complexity and interdependence of economic indicators, market sentiments, and corporate developments.