Focus Shifts To Friday's Jobs Report With Higher-Rate-Longer Scenario Taking Hold

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. 

Investors are awaiting December jobs report on Friday and are hoping that total payroll expansion may be smaller than in November when the economy added 263,000 jobs. 

Monthly job growth in the first eleven months in 2022 averaged 392,000. 

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 

Benchmark indexes are likely to extend recent weekly loss string to the fifth week if indexes close down on Friday. 

The S&P 500 index fell 1.1% to 3,808.12 and the Nasdaq Composite index declined 1.1% 5o 10,305.24. 

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 the five-year average of 98 bcf after colder-than-normal weather forced consumers and businesses to burn more gas. 

Crude oil futures price rose $1.07 to $73.91 a barrel and natural gas futures contract dropped 10% or 39 cents to $3.78 a thermal unit. 

 

Treasury Yields Advance  

The yield on 2-year Treasury notes increased to 4.46%, 10-year  Treasury notes edged up to 3.72% and 30-year Treasury bonds inched down to 3.80%. 

 

European Markets Rest On U.S. Rate Path Worries 

European markets turned weaker after three days of gains and market sentiment turned cautious after the release of the U.S. Fed policy meeting minutes. 

Market indexes struggled to gain traction after investors weighed the easing of inflation in Italy and the U.S. policy makers expressed support for raising rates to restrictive levels. 

Investors also were on the backfoot after two separate jobs reports highlighted tight labor market conditions in the U.S. sending signals for the Federal Reserve to continue to lift rates in 2023. 

 

German Trade Surplus Expands In November 

Germany's international trade surplus increased in November after imports fell at a faster pace than exports, the Federal Statistics Office said Thursday. 

International trade surplus in November rose to a seasonally adjusted