It was a fascinating session yesterday that told a number of stories.

There is still excitement about a more reasonable Federal Reserve, which makes some think that a soft landing is possible. By the same token, there were so many major economic data misses that it’s fair to wonder if the economy will go off a cliff.

Markets have improved, but there is still smoldering carnage.

Prices Index

Prices are coming down, which should be cheered. But again, if they are coming down solely because of a sharp decline in demand, then that’s not good, either. I get it that economists think anything is better than inflation but tell that to people who are depleting their savings and may soon lose their job. They’d gladly overpay for an apple or a carton of milk.

To understand just how ugly the data was yesterday, look at the sharp decline in the fourth quarter Gross Domestic Product (GDP) estimate at the Atlanta Fed,  down to 2.8% from 4.0%. Ouch.

Jobs Report

There are lots of signs that today’s report could be a negative surprise, including hiring, which is down 20.5% last month from a year earlier.

 Meanwhile, if we have hit peak inflation, there is hope real wages will move into the plus column - they have been too negative for far too long.

Today’s Session

November Labor Report

Once again, the total number of jobs came in above consensus at 263,000.  The report is solid but not as great as the accolades you will hear on TV all day. There are a few issues from a Main Street point of view that I’m concerned with. For the market, hourly wages are an issue for the Fed, so it’s an issue for investors. The main issue there is 186,000 left the labor force. It is mindbogglingly anyone could afford to walk away, but the continued exodus puts upward pressure on wages.

NFP

 

Red Flags

• Private jobs continue to trend lower
• Work week dipped
• Temp jobs were negative

Highlights

Hourly wages +0.6% consensus +0.3%

Knee Jerk

We don’t want to panic as algorithms and panicky traders set the tone but will use pre-opening levels to serve as a guide.

The ten-year bond yield erupted higher but stalled in the shadow of key resistance at 3.64%. 

Ten Year Bond Yield

The dollar index popped as well but held right under 105.8, which is another pivotal and potential swing point.

Dollar (DXY)

 

 

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