The December jobs report sent mixed signals. Here's what it means for markets.
Hey team. Phil Rosen here, reporting from Los Angeles.
One of the best parts of my day is thumbing through my inbox and scrolling through Twitter to go through readers' responses to this newsletter. I read every single one — and I've learned that this corner of the internet is bright, perceptive, and very in-the-know on markets.
Based on replies I received Friday, I know many of you saw the Labor Department's latest data release. The US added more jobs than expected in December, and the unemployment rate declined.
But, these days, good news is bad news for stocks.
Remember, for months now the Fed has been trying to cool the economy.
Policymakers are hesitant to say it outright, but they're attempting to engineer higher unemployment and fewer job openings by raising interest rates and forcing companies to tighten their belts.
The latest numbers are flying in the face of those efforts — but there was a silver lining that investors cheered on Friday.
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1. The December jobs report is another data point that signals the Fed has more work to do to cool the economy.
Plenty of CEOs and economists have opined on a looming downturn, but none of those predictions have yet materialized, and the robust jobs figures continue to keep the economy running hot.
"A labor market this strong means an imminent recession is highly improbable," Indeed Hiring Lab economist Nick Bunker wrote in a note. "This year will pose many challenges for the US economy, but the labor market looks set to enter with considerable strength."
And Jan Szilagyi, CEO of financial insights firm Toggle AI, said the recent data indeed paints a picture of a cooling economy, but doesn't necessarily mean good news in policymakers' view.
"Pace of job growth is still way above the speed limit," Szilagyi said. "So for now the economy isn't anywhere near the kind of 'benign job growth' the Fed wants to see."
While stocks usually sell off after these strong reports, fearing the worst from the Fed, Friday saw a strong rally.
What gives?
Traders cheered the slowdown in wage growth. It's a small win, but it could be an important data point for the Fed to make the decision to pull back or pause its rate-hike campaign.
And that would be welcome news for stocks, which have taken a beating over the last year amid the Fed's aggressive moves.
Traders are betting on roughly three-in-four odds of a 25-basis-point rate hike at the February Fed meeting, according to CME's FedWatch tool, which would mark the smallest adjustment out of the last six meetings.
In Friday comments, Fed governor Lisa Cook said inflation still has much more to fall to reach acceptable levels.
"I would caution against putting too much weight on the past few favorable monthly data reports," she said at the Allied Social Science Associations conference.
What's your recession outlook right now?
- A) Recession within six months
- B) The US will avoid a recession
- C) The US is already in a recession
Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. Global stocks rise early Monday, buoyed by the reopening of China's economy. Alibaba shares hit a six-month high as news also emerged founder Jack Ma is ceding control of affiliate fintech firm Ant Group. Here are the latest market moves.
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7. Tesla stock has tumbled to multiyear lows. The company slashed prices for its electric vehicles in China for the second time in less than three months. Concerns are mounting that Tesla may face a shortfall in demand as the global economy slows down.
8. Buy these 10 top tech stocks before the sector rises by 20% this year. Wedbush analyst Dan Ives explained why he's still bullish on tech despite a brutal 2022 outing — and where to invest ahead of the comeback.
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10. Warren Buffett-backed BYD soared past Tesla in China sales. The company has bucked the wider EV stock sell-off. Over the past three months, shares of BYD are down just 2% — compared to the 54% decline in Tesla in the same stretch.
Curated by Phil Rosen in Los Angeles. Feedback or tips? Tweet @philrosenn or email prosen@insider.com
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.