Markets struggle after online spending reached a record

Dow rose 197, advancers over decliners about 2-1 & NAZ was off 12.  The MLP index crawled up 1+ to the 258s & the REIT index added 1+ to the 391s.  Junk bond funds were mixed & Treasuries saw more selling which raised yields (more below).  Oil slid lower in the 72s & gold was up 9 to 2052.

AMJ (Alerian MLP Index tracking fund)

Consumers spent a whopping $222.1B online during the holiday season as usage of flexible spending options hit an all-time high, according to new data from Adobe.  The figure, up 4.9% year over year, marks a new record for online shopping throughout the holiday season, which spans from Nov 1 thru Dec 31., according to Adobe's holiday spending report.  Adobe noted that the boost in spending was driven in large part by such heavy reliance on "buy now, pay later" (BNPL) options, which allow consumers to pay in installments, often interest-free.  The payment option accounted for $16.6B in online spending, up 14% on an annual basis, during the season, underscoring how Americans were trying to manage their debt obligations amid persisting inflation, high interest rates & resumed student loan payments.  Throughout Nov, the payment option accounted for about $9.2B of the $123.5B spent.  That's up 17.5% year over year.  Cyber Monday was the biggest day of BNPL transactions overall, accounting for $940M in spending, up 42.5% year over year.  Usage of the payment method surged before the holiday season.  From Jan 1 to Dec 31, 2023, it accounted for $75B in online spending, about $9.4B more than the prior year.  Adobe Digital Insights lead analyst Vivek Pandya said that companies took advantage of flexible payment methods to pull in shoppers amid the uncertain economy.  And while it was effective, driving record spending online during both Cyber Monday & Black Friday, certain industry experts have drawn concern about how much consumers have been leaning on this method.  Financial experts are especially worried about whether consumers are overusing these services & digging themselves deeper into debt.  Those concerns come as total household debt reached $17.3T in the 3rd qtr of 2023, according to the New York Federal Reserve's latest quarterly report on household debt & credit.

Online holiday spending reaches record $222B driven by buy now, pay later trend

Hiring by US companies rose more than expected in Dec as the labor market remained resilient even in the face of higher interest rates, according to the ADP National Employment Report.  Companies added 164K jobs last month, beating the 115K gain that was predicted.  It marks the best month for job creation since Aug.  The stronger-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has hiked interest rates to the highest level since 2001.  But policymakers have signaled in recent weeks that they are done raising rates amid signs that inflation is finally moderating & the economy is starting to slow.  In a welcoming sign for the Fed, wage growth continued to slow in Nov.  Annual pay rose 5.4% last month, the 15th straight month of slowing growth.  For workers who switched jobs, wages climbed 8%, down from 8.3% the previous month.  "We're returning to a labor market that's very much aligned with pre-pandemic hiring," said Nela Richardson, ADP chief economist.  "While wages didn't drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared."  The leisure & hospitality industry drove the biggest job gains last month, adding 59K new employees.  But there were also notable gains in other sectors, including education & health services, financial activities & construction.  The gains helped to offset job losses in manufacturing, natural resources & mining & information.

Private sector job growth rises more than expected in December: ADP

Treasury yields ticked higher following the release of fresh employment numbers.  The yield on the 10-year Treasury was up by 8 basis points at 3.982% after crossing the 4% mark briefly yesterday.  The 2-year Treasury  yield was last up by 5 basis points at 4.372%.  Yields & prices move in opposite directions & one basis point equals 0.01%.  Investors are considering the outlook for Federal Reserve interest rate cuts, including when they could begin & how drastic they could be.  After its last policy meeting in Dec, the central bank said it expected 3 rate cuts to take place in 2024.  However, traders have been hoping that there will be more than extensive rate cuts this year & that the first one could be coming soon.  Minutes from the Fed's Dec meeting indicated uncertainty about the path ahead for interest rates even as policymakers believe rate cuts are likely.  Fed officials noted the importance of a “careful and data-dependent approach to making monetary policy decisions” & stated that restrictive policy would continue to be appropriate “for some time” until inflation sustainably falls to the central bank’s target range.  Investors now, but when it turn their attention to tomorrow's nonfarm payrolls report when a gain of 170K is expected.

10-year Treasury yield approaching 4% again after strong jobs data

Investors are becoming nervous on the future for interest rate cuts after rates have been climbing in the past week.  Retail sales data sounds good.  But when it is attributable to more borrowing sends the wrong message to the Fed which wants to control inflation.  Today's sort of rally is not impressive.

Dow Jones Industrials