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December jobs report headlines first week of 2024 trading: What to know this week

December jobs report headlines first week of 2024 trading: What to know this week


Actions completed 2023 on a historic winning streak.

The S&P 500 (^GSPC) enters the new year with an increase for nine consecutive weeks, the longest consecutive streak of weekly gains since 2004.

The first trading week in 2024 will instantly test the rally with a crucial December jobs report scheduled for release Friday morning. The economic calendar will also include Federal Reserve meeting notes, the latest job posting update and new data on activity in the manufacturing and services sectors.

On the corporate side, quarterly reports from Cal-Maine Foods. (CALM), Walgreen Boots Alliance (WBA) and the Constellation brands (STZ) highlight a sparse week of company results. Quarterly delivery figures from electric vehicle maker Tesla (TSLA) will also be closely followed by Wall Street.

The markets will be closed on Monday for the New Year.

A roaring two-month rally brought several of the major indexes to or near all-time highs late last year. The Dow Jones gained 13.7%, or more than 4,500 points in 2023, and crossed the 37,000 mark for the first time ever. The S&P 500 added 24%, pushing the major average within range of its closing record of 4,796.56. Meanwhile, the Nasdaq Composite (^IXIC) added 43.42%, its best annual return since 2020.

Increased Bets that the American economy could achieve the vaunted goals “soft landing” — where inflation recedes toward the Fed’s 2% target without a recession — has driven the stock market rally through the end of 2023. A key part of this narrative has been that the labor market has held up more than expected.

Notable elements of this scenario include an unemployment rate near the same levels as when the Fed began its rate-hiking cycle, the ratio of unemployed to job openings. reach its lowest level in more than two yearsand a slight increase in layoffs followed by weekly unemployment registrations.

For some economists, all this shows a labor market it’s cooling enough that cash-strapped consumers won’t drive up inflation, but it’s not so low that a recession could occur.

Projections for the December jobs report reflect a similar story. The report is expected to show that 168,000 nonfarm payroll jobs were added to the U.S. economy last month, while the unemployment rate rose. at 3.8%, according to Bloomberg data. In November, the American economy created 199,000 jobs while the unemployment rate unexpectedly fell to 3.7%.

“We do not expect a sharp contraction in employment at this time, but remain cautious as we approach 2024,” the Jefferies economic team led by Thomas Simons wrote in a research note on Friday. “With the UAW strike finally behind us, we expect the volatility in manufacturing payrolls that we have seen over the past two months to stabilize.”

Markets enter the new year betting that the Fed will cut interest rates in March. On Friday, investors expected a rate cut by the end of the March meeting to 87%, according to the CME FedWatch tool.

But among economists, there is no consensus on this expectation. Ellen Zentner, Morgan Stanley’s chief U.S. economist, said data such as the December jobs report will need to show more signs of cooling than what has been presented now for the current market forecast to a reduction in spending in March is taking place.

“Resilient labor markets with a slight downward trend also indicate a later start to cuts than markets expect,” Zentner wrote in a Dec. 19 research note.

Zentner estimates that monthly payroll increases would need to drop below 50,000 by the February report, coinciding with persistently low inflation numbers, so the Fed can cut them in March. Even then, the slowdown in employment should be a trend and not just a low number.

“The nonfarm payrolls numbers are noisy, so we don’t think one bad number will be enough to reduce rates,” Zentner said of the jobs reports.

Morgan Stanley’s base case remains that the Fed’s first cut will come in May.

December jobs report headlines first week of 2024 trading: What to know this week

Widely, one of the biggest questions facing investors The question will be whether the late 2023 rally simply delayed the timeline of gains investors expected in 2024., or whether the market has yet to surpass its current level of all-time highs.

Ryan Detrick, chief market strategist at Carson Group, points out that history is on the side of stocks continuing to gain in 2024.

In years where November and December resulted in the S&P 500 rallying more than 10%, which just happened in late 2023, the benchmark rose an average of 19.5% the following year, according to Detrick’s research.

But even some of the market’s biggest bulls have noted recently that those gains aren’t likely to come at a steady pace. Tom Lee, head of research at Fundstrat, which holds one of the S&P 500’s highest targets next year at 5,200forecasts a major average drop in early 2024.

“For us, it is only a matter of days before we reach new all-time highs (for the S&P 500),” Lee wrote in a note to clients Friday. “But then we’ll probably consolidate.”

Lee believes there are a few major concerns that could weigh on the markets. He thinks investors could get “Itches” to think about when the Fed will cut rates and points out that a slowdown around February or March in an election year is typical.

“In the current environment, we could see the S&P 500 range between 4,400 and 4,500 once we reach all-time highs, or a modest pullback,” Lee wrote. “This is consistent with our outlook for 2024, where our base case is that the S&P 500 realizes most of its gains during (the second half of 2024).”

Weekly calendar

Monday

Markets are closed for the New Year holidays.

Tuesday

Earnings:

Economic data : S&P Global US Services PMI, December, final (48.4 expected, 48.2 previously); MBA Mortgage Applications, Week Ending December 29

Wednesday

Earnings: Cal-Maine Food Groups (CALM)

Economic data : JOLTS Job Openings, November (8.85 million expected, 8.73 million previously); ISM Manufacturing, December (47.2 expected, 46.7 previously); ISM prices paid, December (previously 49.9); FOMC Meeting Minutes

THURSDAY

Earnings: Conagra Brands (CAG), Weston Lamb (L.W.), Walgreens (WBA)

Economic data : Change in employment at ADP, December (113,000 expected, 103,000 previously) Job cuts at Challenger, year over year, December (-40.8% previously); Initial weekly jobless claims, Dec. 30 (previously 218,000) S&P Global US Composite PMI, December, final (previously 51);

Friday

Earnings: Constellation Brands (STZ)

Economic data : Non-agricultural payroll, December (+168,000 expected, +199,000 previously); Unemployment rate, December (3.8% expected, 3.7% previously); Average hourly wage, month over month, December (+0.3% expected, +0.4% previously); Average hourly wage, over one year, December (+3.9% expected, +4.0% previously); Average weekly hours worked, December (34.4 expected, 34.4 previously); Activity rate, December (62.8% expected, 62.8% previously); Factor orders, November (+2.1% expected, -3.6% previously); Durable goods orders, November (+5.4% previously); ISM Services, December (52.5 expected, 52.7 previously)

Josh Schafer is a reporter for Yahoo Finance.

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