Dow dropped 442, decliners over advancers 5-2 & NAZ retreated 137. The MLP index was fractionally lower to the 214s & the REIT index sank 1+ to 368. Junk bond funds slid lower & Treasuries were sold, raising yields. Oil rebounded 1+ to the 74s & gold retreated 23 to 1635 after recent strength,
AMJ (Alerian MLP index tracking fund)
Hiring by US companies picked up steam in Dec, a sign the job market remains healthy even in the face of steep Federal Reserve interest rate hikes, according to the ADP National Employment Report. Companies added 235K jobs last month, easily beating the 150K gain that had been predicted. Data for Nov was revised to show that 127K jobs were added. The stronger-than-expected report comes as the Fed wages the most aggressive fight since the 1980s to crush inflation & slow the labor market with higher interest rates. However, the hiring was not broad-based:. While the goods-producing sector added just 22K new positions, services providers added 213K. The bulk of the gains in Dec stemmed from the leisure & hospitality industry, which added 123K new workers. Professional services followed with 52K hires & it was trailed by education & health services with an increase of 42K. "The labor market is strong but fragmented, with hiring varying sharply by industry and establishment size," said Nela Richardson, the chief economist at ADP. "Business segments that hired aggressively in the first half of 2022 have slowed hiring and in some cases cut jobs in the last month of the year." The biggest losses, meanwhile, were in the trade, transportation & utilities sector, which saw payrolls decline by 24K. Financial activities shed 12K jobs, while natural resources & mining lost 14K. By size, large businesses accounted for the entirety of the job losses, shedding 151K positions in Dec. Small businesses, meanwhile, added 195K workers, while medium businesses that employ between 50-499 workers had job gains of 191K.
Private sector job growth jumps by 235,000 in December, beating expectations: ADP
As her central banking career comes to a close, Kansas City Federal Reserve Pres Esther George is advising her colleagues to stay tough in their efforts to stamp out runaway inflation. George said that she thinks the Fed should raise its benchmark borrowing rate above 5% & keep it there until there are substantial signs that prices are stabilizing. “Holding that until we get evidence that inflation is actually coming down is really the message we’re trying to put out there,” she said. “I’ll be over 5% and I see staying there for some time, again until we get the signal that inflation is really convincingly starting to fall back toward our 2% goal.” At the Dec Fed meeting, the rate-setting Federal Open Market Committee voted to raise the fed funds rate ½ a percentage point to 4.25%-4.5%. Meeting minutes indicated that members see no chance of any rate cuts in 2023 & they expressed concern over whether the public mistakenly might view the step down in rate hikes, from a string of 4 straight 3-qtr point moves, as a softening in policy. Asked whether her view is that the funds rate should hold above 5% into 2024, George replied, “It is for me.” That statement comes a day after Minneapolis Fed Pres Neel Kashkari wrote that he thinks the funds rate should rise to 5.4% & could go even higher if inflation doesn’t come down. In previous comments, George has said the tighter monetary policy is expected to tamp down demand & slow economy, possibly enough to create a recession. She said that she doesn't see that as inevitable, but rather as a possibility. “I’m not forecasting a recession,” she said. “But I’m quite realistic that when you see below-trend growth and the idea that our instrument is going to work on demand, bringing that down, it doesn’t leave a lot of margin there. Any shock could come, any risk to the outlook could send the economy in that direction. So it’s not my forecast, but I do understand that bringing demand down creates that sort of possibility.”
Fed’s Esther George sees rates staying high at least into 2024
Online sales during the holiday season jumped 3.5% year over year to $211B, according to Adobe Analytics, as record high discounts persuaded shoppers to open up their wallets. That spending marked a new record for e-commerce sales during the major retail season. The overall spending got a boost from key shopping holidays, including $35.3B in online sales during Cyber Week, the 5-day period from Thanksgiving to Cyber Monday. The latest holiday numbers come as retailers brace for a tougher year and see signs that consumers may be running out of gas. As inflation remains high, Americans are running up credit card balances & socking away less money in savings accounts. Sales of some big-ticket items, such as jewelry & consumer electronics, have declined. Retailers have marked down merchandise & scaled back orders to clear thru excess inventory to prepare for a potential recession. Food & housing costs, in particular, have shot up in price, taking a bigger chunk out of budgets. Inflation rose less than expected in Nov, but was still up 7.1% year over year, according to the Labor Dept. But retailers have gotten price-sensitive customers to press the “buy” button with steep promotions. Prices dropped on major retailers' websites during the holidays & discounting levels were deeper than ever. Toy discounts peaked at 34% off listed price during the holiday season, up from 19% in the year-ago period. Electronics discounts peaked at 25%, up from 8% in the year-ago period & apparel peaked at 19%, up from 13% a year ago. Computers, TVs, appliances & sporting goods were also more promotional. “At a time when consumers were dealing with elevated prices in areas such as food, gas, and rent, holiday discounts were strong enough to sustain discretionary spending through the entire season,” said Vivek Pandya, lead analyst of Adobe Digital Insights.
Online holiday sales jump by 3.5% as discounts persuade deal-hungry shoppers
Gloomy thoughts are in many investors' minds these days. The Fed will keep raising interest rates to slow the economy (i.e. consumer spending) & that suggests a serious recession. The Dow chart shows it has been pretty much flat lining for more than 2 weeks. Safe haven gold continues in demand, even after today's profit taking.
Dow Jones Industrials
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