The month ly US jobs report for the month of December will be released tomorrow with the recent expectations showing:

  • Consensus estimate +200K (high +350K, low +130K)
  • Private +180K
  • November +263K
  • Unemployment rate consensus estimate: 3.7% vs 3.7% prior
  • Participation rate prior 62.1% (no consensus estimate)
  • Prior underemployment U6 6.7%
  • Avg hourly earnings y/y exp +5.0% y/y vs +5.1% prior
  • Avg hourly earnings m/m exp +0.4% vs +0.6% prior
  • Avg weekly hours exp 34.4 vs 34.4 prior

Before the fireworks from that report at 8:30 AM ET, the markets got two separate reports on jobs. The ADP employment report was first released at 8:15 AM today and showed a gain of 235K vs 150K estimate. The ADP was much weaker last month vs the BLS report. So that news sent the pre-market stocks into negative territory, the dollar higher and rates higher as well.

Fifteen minutes later, the weekly initial jobless claims were released, and it showed that claims for the week fell to 204K vs 225K estimate. Moreover, continuing claims also declined (stronger employment) . That bothered the market further and shifted the bias more to upside for the US dollar.

Fed talk today was suggestive of higher rates and a more prolonged period of steady rates with Fed's George saying that she did not see rates coming back down until "well into 2024". That is not what the market was thinking. Later Fed's Bullard reiterated his desire to go fast for the kill from restrictive policy (see post here).

Rates did move up higher with the 2 year reaching an intraday peak of 4.495% before settling back down to 4.46% near the close. The high cycle yield reached 4.88% back on November 4.

The 10 year yield meanwhile, moved to 3.782%, but backed off to 3.72% near the end of day. The high today in the 10 year was still 12 bps short of the high from last week at 3.90%. The high for the rate hike cycle reached 4.335%. The inability to push yields higher, may be a reluctance ahead of the jobs report tomorrow, or an indication that what the Fed says and does, may not really matter anymore. The bond market sees overtightening and lower inflation as a result

How did that translate to stocks today? Lower across the board.

  • Dow industrial average fell -339 points or -1.01% (low was -457.45)
  • S&P fell -44.89 points or -1.17% (low was -50.56)
  • Nasdaq fell -153.51 points or -1.47% (low was -163.51 points)

Looking at the strongest to the weakest of the major currencies, the USD was the strongest. The GBP and the AUD were the weakest. The GBPUSD moved lower by over 1% (-1.05%) and traded to the lowest level since November 23rd.

The pair also moved further away from the 200 day MA above at 1.20278. It is ending the day at 119.07. The month long run in December above the 200 day MA may be over for a while.

Forex

For the EURUSD, it moved back down to test the 50% midpoint of the 2022 range at 1.05155. The price is closing just 6 or so pips from that level going into the new trading day. The employment number tomorrow will likely kick the pairs price away from that level and influence the bullish or bearish bias going forward.

In other markets:

  • Spot gold will lower in reaction to the higher dollar. The price is trading down over $21 or -1.13% at $1832.70
  • spot silver is trading down $0.52 or -2.17% at $23.23
  • WTI crude oil traded both positive and negative today but is trading up around $1.06 at $73.90
  • The price bitcoin made steady near $16,840 with a range of $16,755 and $16,871