Good News On Labor Market Is Bad News On Wall Street

Barry Adams
05 Jan, 2023
New York City

U.S. stocks traded lower after two separate reports indicated a stable and healthy labor market, raising the prospects of the Federal Reserve continuing its hawkish stance. 

Private sector job additions accelerated in December and weekly jobless claims at the end of last week dropped to the low last seen three months ago. 

After the release of the reports, bond yields edged slightly higher and commodities traded volatile. 

Natural gas prices plunged 10% to the low last seen about a year ago after a report from the government agency showed a smaller-than-expected decline in inventories. 

 

Private Sector Job Additions Accelerated In December 

Private sector accelerated adding new jobs in December, providing another positive signal about the health of the U.S. labor market. 

U.S. private businesses added 235,000 net new jobs in December after adding 182,000 jobs in November, according to the ADP monthly survey released Thursday.  

Service sector jobs expanded by 213,000 led by 135,000 jobs in leisure and hospitality, 52,000 in professional business services and 42,000 in education and health services. 

 

Jobless Claims Drops to 3-month Low 

The initial claims fell to the lowest level since September indicating tight labor market conditions and health of the U.S. economy. 

The number of people filing unemployment claims declined to 204,000 in the week ending December 31 from the previous week's revised level of 223,000, the Department of Labor reported Thursday. 

The 4-week moving average declined to 213,750 from 220,500 in the previous 4-week period. 

 

U.S. Trade Deficit Drops In November 

The U.S. trade deficit fell more than expected in November, according to the latest data from the U.S. Bureau of Economic Analysis. 

International trade deficit of goods and services declined to $61.5 billion in November, down $16.3 billion from the revised $77.8 billion in October.  

Total exports of goods and services fell 2% to $251.9 billon and imports fell 6.4% to $313.4 billion. 

The deficit with China fell $5.8 billion to $20.4 billion and the shortfall with the European Union narrowed $3.6 billion to $19.5 billion. 

 

U.S. Indexes In Review 

The S&P 500 index fell 1.0% to 3,814.62 and the Nasdaq Composite index declined 1.1% to 10,342.96. 

Natural prices dropped on the worries that the demand may be easing amid unusually warm weather across the nation. 

 

Natural Gas Drops 10% 

U.S. utilities withdrew 221 billion cubic feet of gas from storage during the week ended December 30th, according to the Energy Information Administration report released Thursday. 

The decline in inventories was still significantly higher than 31 bcf fall in the similar week a year ago and higher than 98 bcf five-year average after colder-than-normal weather forced consumers and businesses to burn more gas. 

Crude oil futures price rose 88 cents to $73.66 a barrel and natural gas futures price dropped 12% or 50 cents to $3.66 a thermal unit. 

 

Treasury Yields Advance  

The yield on 2-year Treasury notes increased to 4.45%, 10-year  Treasury notes edged up to 3.72% and 30-year Treasury bonds inched down to 3.79%. 

 

Japanese Yen Drop and Tech Stocks Rebound 

Japan's market indexes closed higher following the weakness in the yen and China optimism lifted indexes in Shanghai and Hong Kong.

The Nikkei 225 average gained 0.4% to 25,820.80 after the yen edged lower to 132.78 against the U.S. dollar.

Tech stocks and exporters led the gainers in Tokyo trading today. Nippon Sheet Glass led the gainers with a rise of 7.5%.

Softbank Group, Sony, Advantest and Tokyo Electron gained between 2% and 4%.

Toyota Motor, Honda Motor and Nissan Motor fluctuated between a gain and a loss of 1% on the hopes that the revival in economic growth may lift global sales.  

 

PBOC Offers to Support Targeted Help, Hong Kong Extends Rally 

The Chinese government said it will reopen its border with Hong Kong on January 8, nearly three years after halting travel between the mainland and the island to contain the spread of Covid virus.

Hong Kong extended three week gains to 12% and 4% in the year so far after the People's Bank of China said it plans to provide more financial support to the struggling property sector after its annual work conference.

Alibaba.com led the gainers after the company accelerated its restructuring of Ant Financial Services Group after the banking regulators permitted the company to increase its capital to 18.5 billion yuan from 8 billion yuan.

The move will also allow the payment processor and financial services provider to expand its consumer base and potentially revive the listing of Ant Financial in Hong Kong.

The Shanghai Composite index soared 1.1% to 3,155.22 and the Hang Seng index advanced 1.3% to 21,052.17.

Market indexes in China rebounded despite the service sector activities contracted for the fourth month in a row in December, though the pace of decline fell.

The Caixin/S&P Global PMI Services Index increased to 48 in December from 46.7% in November.