Dow sank near session lows to 531, decliners over advancers about 6-1 & NAZ dropped 431, The MLP index was off 3+ to the 223s & the REIT index which are interest rate sensitive dropped 6+ to the 383s. Junk bond funds declined along with stocks & Treasuries were heavily sold raising yields. Oil fell 2+ to the 77s near 2022 lows & gold plunged 29 to 177982n unusually wild trading (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
US demand in China's manufacturing industry has reportedly dropped sharply as the country continues to grapple with COVID-19 lockdowns. Some US companies have signaled plans to shift away from China. Already major US companies are planning to pivot some production elsewhere in Asia, such as India & Vietnam. US manufacturing orders in China are down 40%, according to the CNBC Supply Chain Heat Map. China's
manufacturing purchasing managers' index, which measures the
performance of the country's manufacturing industry, came in at 48.0 in
Nov, the lowest reading in 7 months, according to the country's
National Bureau of Statistics. Meanwhile,
China's non-manufacturing PMI, which reflects business sentiment in the
country's service & construction industry, dropped from 48.7 in
October to 46.7 in Nov. China has stuck by its zero-COVID policy amid a rise in COVID-19 cases in recent weeks. The latest round of lockdowns sparked protests throughout the country, with hundreds of workers demonstrating this week in Zhengzhou at the flagship factory of manufacturer Foxconn, which serves as Apple's (a Fox & NAZ stock) main subcontractor in China.
US orders in China reportedly fall to jaw-dropping amount during lockdowns
A majority of business economists believe that the US economy will continue to slow & enter a recession next year, but the impact on the labor market may be limited relative to recent downturns. Tha's according to the results of a new survey published by the National Association for Business Economics (NABE), which showed 57% of respondents believe the probability of recession in 2023 is greater than 50%. A 52% majority of economists who responded believe a recession will begin in Q1 of 2023. The survey, which was conducted Nov 7-18, pointed to the Federal Reserve's continued tightening of monetary policy in an effort to tame inflation as the biggest challenge facing the economy. When asked to identify the greatest downside risk to the economy, 65% of respondents cited too much monetary tightness. A similar question was posed about the greatest upside risk & 50% of respondents identified the Fed achieving its desired "soft landing" by reining in inflation without a severe recession. Economists surveyed were skeptical about the likelihood of a soft landing, with 77% putting the probability of one at 50% or below. Slower growth in the labor market is expected to correspond with an uptick in the unemployment rate, although it's still forecasted to remain at a lower level than in prior economic downturns according to the NABE survey. A 56% majority of respondents think the unemployment rate will peak at 5% or lower, while 17% think it will reach 5.5% or more – which would be similar to the unemployment rate during past recessions. The unemployment rate was unchanged month-over-month at 3.7% in the latest jobs report.
Labor market may skirt U.S. recession: NABE
As far as jobs reports go, Nov's wasn't exactly what the Federal Reserve was looking for. A higher-than-expected payrolls number & a hot wage reading that was twice what had been forecasted only add to the delicate tightrope walk the Fed has to navigate. In normal times, a strong jobs market & surging worker paychecks would be considered high-classproblems. But as the central bank seeks to stem persistent & troublesome inflation, this is too much of a good thing. Payrolls grew by 263K in Nov, well ahead of the 200K estimate. Wages rose 0.6% on the month, double the estimate, while 12-month average hourly earnings accelerated 5.1%, above the 4.6% forecast. All of those things together add up to a prescription of more of the same for the Fed — continued interest rate hikes, even if they’re a bit smaller than the 3-qtr percentage point per meeting run the central bank has been on since Jun. The numbers would indicate that 3.75 percentage points worth of rate increases have so far had little impact on labor market conditions. Much analysis after the report was viewed through the prism of comments Fed Chairman Jerome Powell made Wed. The central bank chief outlined a set of criteria he was watching for clues about when inflation will come down. Among them were supply chain issues, housing growth & labor cost, particularly wages. He also went about setting caveats on a few issues, such as his focus on services inflation minus housing, which he thinks will pull back on its own next year. To be sure, all is not lost. Powell said he still sees a path to a “soft landing” for the economy. That outcome probably looks something like either no recession or just a shallow one, nevertheless accompanied by an extended period of below-trend growth & at least some upward pressure on unemployment. From a pure labor market perspective, that would mean an eventual downshifting to maybe 175K new jobs a month, the 2022 average is 392K, with annual wage gains in the 3.5% range. There is some indication the labor market is cooling. The Labor Dept's household survey, which is used to calculate the unemployment rate, showed a decline of 138K in those saying they are working. Some economists think the household survey & the establishment survey, which counts jobs rather than workers, could converge soon & show a more muted employment picture.
The Fed’s path to a ‘Goldilocks’ economy just got a little more complicated
Oil futures fell, with US prices settling at their lowest price in more than a week. The Institute for Supply Management's reading on US service-sector business conditions rose to 56.5% in Nov, despite efforts by the Federal Reserve to ease inflation. Continued Fed tightening can only reduce demand for oil. Meanwhile, on the first day of trading after the EU ban on Russian seaborne oil, Russian barrels are flowing unabated with new Asian orders replacing the expiring European ones. US benchmark WTI crude for Jan fell $3.05 (3.8%) to settle at $76.93 a barrel. That was the lowest front-month contract finish since Nov 25.
U.S. Oil Futures Settle at Low in more than a Week
Gold declined after briefly tapping a 4-month high, as worries about recent data showing stronger-than-expected US business conditions & wage growth boosted the $ & Treasury yields, along with expectations for more aggressive rate-hikes by the Federal Reserve. Gold prices for Feb fell $28 (1.6%) to settle at $1781 per ounce on Comex. It had traded as high as $1822 in early dealings, the highest intraday level for a most-active contract since Aug 10. The fact that gold turned lower from a key level makes today's reversal eye-catching. Gold futures settled above $1800 on Thurs for the first time since mid-Aug. Data from the Institute for Supply Management showed that a barometer of US business conditions at service-sector companies rose to 56.5% in Nov. The forecast had expected a drop to 53.7%. Following that data, the ICE US Dollar index was up 0.6% at 105.20 & the 10-year Treasury yield climbed more than 8 points to 3.595%, pressuring prices for gold. Today's ISM data followed the Nov report on nonfarm payrolls, which revealed the creation of 263K new jobs & a rise in hourly pay of 0.6%. Separately, US factory orders rose by a more than expected 1% in Oct. Fri's US jobs data was a big setback for the yellow metal. The hotter-than-expected Nov jobs number, combined with hot wage-growth numbers reinforced the notion that the Federal Reserve still has a long way to go in its quest to suppress inflation.
Gold prices settle below $1,800 an ounce after a stronger-than-expected ISM services data
Another tough day for stocks. Everybody worries about soggy data which could be leading to a recession. Then there is the inverted yield signalling a recession warning.Dow Jones Industrials
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