The December jobs report and details from the Federal Reserve’s last policy meeting in 2022 will overwrite a brief opening week of 2023 for investors as Wall Street limps into a new year after its worst run since the global financial crisis.
US stock and bond markets will be closed on Monday 2nd January in celebration of New Year’s Day.
Economic data will pick up as traders return to a four-day trading week after a quiet late December.
The Labor Department is due to release its December jobs report at 8:30 a.m. ET Friday morning, and economists are expecting a payroll increase of 200,000 jobs over the last month, according to Bloomberg consensus estimates.
Aside from the job vacancies headlines, three other job market updates for investors will be on the agenda this week with the latest Job Vacancy and Labor Turnover Survey (or JOLTS report), ADP Personal Payroll data and the Challenger Job Cuts report everything due.
Alongside the barrage of jobs releases, the Fed is set to release an overview of its December monetary policy meeting, which investors will scour for clues as to the central bank’s next move. Last month, the Fed hiked interest rates by 50 basis points, bringing the benchmark rate to 4.25% for 2022 as a whole.
Federal Reserve Board Chairman Jerome Powell delivers a press conference at the Federal Reserve Building in Washington, United States, on December 14, 2022. Portal/Evelyn Hockstein
Global and US stocks ended their worst year since 2008 on Friday. Aggressive central bank action to quell historic inflation and the war in Ukraine hit financial markets, ending a three-year winning streak by major averages.
The S&P 500 plunged 19.4% in 2022, the biggest drop in a calendar year since a 38% drop in 2008 during the Great Recession. The Dow fell a comparatively modest 9% and held up better than its index peers.
The Nasdaq Composite shed a third of its value, falling 33% and ending its first four-quarter decline since the dot-com bubble of 2000, when rising interest rates wreaked havoc on tech stocks.
Even as investors turn the page into 2022, much of Wall Street expects more pain to come.
The story goes on
The forecasts of the consensus strategists assume a volatile first half of 2023 and an easier second half. Still, stocks are expected to be little changed — or marginal gains at best — with the Federal Reserve likely to keep interest rates high for an extended period.
“Against the backdrop of the restrictive Fed’s aggressive rate hike moves into 2023, there is an extraordinarily heightened investor concern about the likelihood of a hard-than-expected landing that would push the U.S. and global economy into recession,” AXS Investments CEO Greg Bassuk said in a note sent by email.
“Investors remain heavily focused on employment, labor and related economic data as continued wage strength could hurt corporate profit margins and paralyze profits across all industries and sectors.”
The job market has cooled in recent months, although demand for labor remains high as Fed officials continue their most aggressive monetary tightening campaign in decades.
Despite policymakers delivering 425 basis points worth of rate hikes in 2022, the US jobs market has averted any major blow while other facets of the economy such as housing and manufacturing showed signs of slowing.
While Wall Street’s consensus estimate for nonfarm payrolls growth last month is 200,000, that would mean a slowdown from the 263,000 jobs added to the economy in November, when forecasts were about the same. The unemployment rate is also at a low of 3.7%, while the employment rate has hardly changed.
“The lagging effect of the Fed’s tightening throughout 2022 will slow economic activity in 2023, a natural outcome of fighting inflation,” Treasury Partners chief investment officer Richard Saperstein said in a note, but added, “The Labor will be the last to turn, forcing the Fed to hold interest rates higher through 2023.”
December FOMC meeting minutes are likely to reveal the thinking behind the central bank’s “slower but higher” regime. Fed Chair Powell has signaled that he and his colleagues will move to smaller rate hikes to assess their toll, but could ultimately hike the final rate higher.
December’s median forecast showed a new high for interest rates of 5% to 5.25%, versus 4.5% to 4.75% in September. The Fed’s 0.50% hike, meanwhile, marked a move down from a steady round of 0.75% hikes.
The FOMC is expected to meet Jan. 31-February 1 and is expected to announce its first rate hike of 2023 and the eighth of the current rate hike cycle after talks conclude.
Elsewhere on the economic calendar this week, the Durable Goods Orders reading and PMI data will provide investors with the latest snapshots of industrial and manufacturing activity.
The earnings calendar remains light during the offseason, with some notable names including Conagra (CAG), Constellation Brands (STZ) and Walgreens Boots Alliance (WBA) set to report.
—
economic calendar
Monday: Markets closed for New Years.
Tuesday: S&P Global Manufacturing PMIDecember Final (46.2 expected, 46.2 last month); construction expensesMoM, November (-0.4% expected, -0.3% mom)
Wednesday: MBA Mortgage Applicationsweek ended December 30 (0.9% in previous week); ISM employment, December (48.4 in the previous month); ISM manufacturingDecember (48.5 expected, 49.0 last month); ISM New ordersDecember (47.2 in the previous month); Paid ISM pricesDecember (42.9 expected, 43.0 last month); JOLTS vacanciesNovember (10.100 million expected, 10.334 in previous month); Minutes of the FOMC meeting14 Dec; Ward’s total vehicle salesDecember (13.70 million, 14.14 in previous month)
Thursday: Challenger job cutsYoY, December (416.5% MoM); ADP Employment ChangeDecember (140k expected, 127k last month); trade balanceNovember (-$74.5 billion expected, -$78.2 billion in previous month); Initial jobless claimsweek ended December 31 (230,000 expected, 225,000 last week); Ongoing Claimsweek ended December 24 (1.710 million in previous week); S&P Global US Services PMIDecember Final (44.4 expected, 44.4 last month); S&P Global US Composite PMIDecember finals (44.6 in the previous month)
Friday: Net revision of bimonthly payrollDecember (-23,000 before); Change in non-farm payrollsDecember (200k expected, 263k last month); Change in private payrollDecember (167k expected, 221k last month); Change in payroll in manufacturingDecember (6k expected, 14k last month); unemployment rateDecember (3.7% expected, 3.7% mom); average hourly salaryMoM, December (0.4% exp., 0.6% mom); average hourly salaryYoY, December (5.0% expected, 5.1% mom); Average weekly hours of all employeesDecember (34.4 expected, 34.4 last month); activity rateDecember (62.2% expected, 62.1% mom); underemployment rateDecember (6.7% in the previous month); ISM Service IndexDecember (55.0 expected, 56.5 last month); ISM service employmentDecember (51.5 in the previous month); Paid prices for ISM servicesDecember (70.0 in the previous month); ISM Services New ordersDecember (56.0 in the previous month); factory ordersNovember (-0.8% expected, 1.0% mom); Factory orders without transportNovember (0.8% in the previous month); Durable Goods OrdersNovember Final (-2.1% MoM); Commodities without transportNovember Final (0.2% in previous month); Non-defense capital goods orders Excluding aircraftNovember Final (0.2% in previous month); Supplies of non-defense capital goods, except aircraftNovember final (-0.1% in previous month)
—
results calendar
Monday: Markets closed for New Years.
Tuesday: No significant reports planned for publication.
Wednesday: UniFirst Corporation (UNF)
Thursday: angiodynamics (ANGO), Conagra (KAG), constellation marks (STZ), Helen of Troy (HELE), Walgreen’s Boots Alliance (WBA)
Friday: No significant reports planned for publication.
—
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
Click here for the latest stock tickers from the Yahoo Finance platform
For the latest stock market news and in-depth analysis, including events moving stocks, click here
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on TwitterFacebook, Instagram, Flipboard, LinkedIn and YouTube