10 Things You Need To Know: January 10, 2023
Key data releases this week include: consumer credit (Mon), NFIB Small Business Optimism (Tue), CPI (Thu), and consumer sentiment (Fri).
Trading Economics
January 6, 2023
The US economy added 223K jobs in December of 2022, beating market expectations of 200K. The unemployment rate in the US dropped to 3.5 percent in December 2022. Average hourly earnings for all employees increased by 4.6% from a year earlier, slowing from a downwardly revised 4.8% rise in the prior month and below market estimates of a 5% advance.
Bloomberg
January 6, 2023
The Institute for Supply Management’s index of services dropped to 49.6 last month, the lowest since May 2020, from 56.5 in November, data released Friday showed. The figure was below all projections in survey of economists.
Bloomberg, Reuters
January 5, 2023
The European Central Bank’s interest-rate hikes should peak by this summer, ECB policymaker Francois Villeroy de Galhau said, though he did not specify what the pinnacle rate should be. “We need to be pragmatic and guided by observed data, including underlying inflation, without fetishism for increases that are too mechanical,” Villeroy said.
Financial Times
January 5, 2023
The Bank of Japan’s decision to ease its policy of pinning long-term government bond yields close to zero has left the world with virtually no negative-yielding debt. Japan had been the last remaining market to have negative-yielding debt after 2022’s bond sell-off wiped out sub-zero yields in other markets.
Barron’s
January 9, 2023
The bottom-up consensus is for EPS to grow by 4.4% to $229.52 in 2023, according to Refinitiv, up from about $220 in 2022. Conversely, the top-down view of Wall Street strategists surveyed in December calls for a 2.7% decline in S&P 500 profits in 2023 to an average of $214 per share. The difference is in the profit margins. Strategists see them getting squeezed by rising wages and higher interest costs, even as the prices they charge customers moderate.
Barron’s
January 9, 2023
Doug Peta, chief U.S. investment strategist at BCA Research, says: “There’s an underestimation of how persistent strength is, notably from the unspent fiscal stimulus of the past two years, which should make for a strong first half, both for the economy and the stock market. Eventually, however, that cache will be tapped out and the lagging effects of Fed tightening will catch up, resulting in a slump later in the year.”
Barron’s
January 9, 2023
The Strategas Research team thinks some Republican members of the House won’t vote to raise the debt limit, even if it’s linked to spending cuts. And Democrats might be unwilling to go along with any cuts, they add. “Absent a major change, we are headed for a toxic debate this spring and summer as Congress is forced to raise the debt ceiling in a very divided and polarized political environment,” the analysts predict.
Bloomberg
January 4, 2023
Minutes of the December 13-14 FOMC meeting show it was concern about easing financial conditions and the labor market not cooling fast enough that drove 17 of 19 FOMC participants to write down a terminal rate above 5% in the updated dot plot. That was a sharp turnaround from the dovish November minutes, which showed several policymakers opining on the risks of overtightening and sounding confident about inflation receding.
Capital Economics
January 9, 2023
The apparent resilience of employment in December has boosted hopes that the US can avoid a recession, but we still think that is unlikely. Employment is a coincident indicator whereas the only genuine leading indicators in the employment report – temporary help employment and hours worked – both point to an imminent recession. In addition, the declines in the latest ISM indices means that nearly all the forward-looking activity surveys are now at recessionary levels too.