The December Employment Report and ISM Services Data - More Push Back on Rate Cut Expectations?
The December Employment Report and ISM Services Data - More Push Back on Rate Cut Expectations?
January 5, 2024
Aside from Energy burning off 1.75%, equities had a relatively quiet day. Technology and Consumer Discretionary extended their current slump, down 0.75% and 0.70%, respectively. Strength was found in Healthcare (0.50%) and Financials (0.40%), while the remaining sectors posted results ranging between -0.33% and 0.13%. The Dow closed essentially flat, eking out a 0.03% gain, and the Russell 2000 also approached neutral, shedding a mere 0.08% as the S&P 500 declined 0.34% and the Nasdaq Composite closed 0.56% lower.
The December Employment Report and ISM Services Data - More Push Back on Rate Cut Expectations?
US equity futures point to a down market open later this morning, suggesting the market’s winning streak will be broken when trading for this shortened first week of 2024 ends. Economic data received so far this week has pushed back on the market’s expectations for six rate cuts this year. Weaker than expected guidance from companies, which has resuscitated valuation questions following the market’s pronounced move in November and December.
That shifting focus will square off against the December Employment Report at 8:30 AM ET followed by ISM’s December Services PMI at 10:00 AM ET. Stronger-than-expected data from either or both reports would build the case that the economy remains vibrant, adding credence the Fed doesn’t need to rush with rate cuts. The market expects the December Employment Report to show 170,000 jobs were added during the month down from 199,000 in November with average hourly earnings falling to +3.9% YoY from 4.0% in November.
ISM’s December Service PMI is expected to dip to a reading of 52.6 from 52.7 in November. Setting the stage for that report, yesterday S&P Global’s December Service PMI came in ahead of expectations, showing a pick-up in employment and new order activity. S&P’s findings also called out higher input costs but tamer output price increases, something that should make margins a big topic in the upcoming 4Q 2023 earnings season. Inflation in the Service sector has been a focus of the central bank and will see investors pick through all of ISM’s findings.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
The strategies behind our Thematic Models:
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
Consumer Inflation Fighters - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Precision Ag & Agri Science – Companies that look to address shrinking arable land by helping maximize crop yields utilizing technology, science, or both.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
Space Economy – Companies that focus on the launch and operation of satellite networks.
The strategies behind our Dividend Income Models:
Monthly Dividend Model – Pretty much what the name says – this model invests in companies that pay monthly dividends to shareholders.
ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.