Lackluster Start to New Year…..

U.S. equities closed lower, with the major indexes posting weekly losses to kick off 2022. The possibility that the Fed could accelerate down the path to monetary policy tightening remained the main catalyst of the weakness in stocks, along with persistent inflation pressures. Another mixed nonfarm payroll report added to the uncertainty, as it showed December job growth severely missed forecasts, even though the unemployment rate dropped much more than expected. In other economic news, consumer credit soared to it largest level on record. On the equity front, T-Mobile US reported stronger-than-expected Q4 subscriber additions but offered some cautious commentary, while GameStop rose amid reports it plans to launch a division to develop a market for NFTs and establish cryptocurrency partnerships. Treasuries were mixed in the wake of the employment data, and the U.S. dollar fell, while crude oil prices declined, and gold was higher. Stocks in both Europe and Asia finished mixed as the markets grappled with the Fed’s minutes, data, and the omicron variant.

The Dow Jones Industrial Average shed 5 points to 36,232, the S&P 500 Index declined 19 points (0.4%) to 4,677, and the Nasdaq Composite fell 145 points (1.0%) to 14,936. In heavy volume, 4.1 billion shares of NYSE-listed stocks were traded, and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.56 to $78.90 per barrel. Elsewhere, the gold spot price advanced $5.20 to $1,794.40 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.6% to 95.75. Markets were lower for the week, as the DJIA ticked 0.3% lower, the S&P 500 decreased 1.9%, and the Nasdaq Composite plunged 4.5%.

December job growth misses again but unemployment rate falls more than expected…..

Non-farm payrolls rose by 199,000 jobs month-over-month (m/m) in December, well below the Bloomberg consensus estimate of a 450,000 rise, while November’s figure was upwardly-adjusted to an increase of 249,000. Excluding government hiring and firing, private sector payrolls increased by 211,000, versus the forecasted rise of 400,000, after increasing by a positively-revised 270,000 in November. The labor force participation rate remained at November’s upwardly-revised 61.9% figure, in line with forecasts. The Department of Labor said employment continued to trend up in leisure and hospitality, in professional and business services, in manufacturing, in construction, and in transportation and warehousing.

The unemployment rate fell to 3.9% from November’s 4.2% rate, versus expectations of a dip to 4.1%. The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—dropped to 7.3% from the prior month’s 7.7% rate. The Labor Department noted that the number of unemployed persons decreased by 483,000 to 6.3 million, with this figure down by 4.5 million over the year. In February 2020, prior to the pandemic, the unemployment rate was 3.5% and unemployed persons numbered 5.7 million. Average hourly earnings increased 0.6% m/m, north of projections calling for a match of November’s positively-revised 0.4% rise. Year-over-year (y/y), wages were 4.7% higher, above forecasts of a 4.2% rise. Finally, average weekly hours remained at November’s downwardly-revised 34.7, below estimates to rise to 34.8.

Consumer credit, released in the final hour of trading, showed consumer borrowing surged by $40.0 billion during November, double the $20.0 billion forecast of economists polled by Bloomberg, while October’s figure was adjusted downward to an increase of $16.0 billion from the originally reported $16.9 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, increased to $20.1 billion, a 7.2% increase y/y, while revolving debt, which includes credit cards, rose by $19.8 billion, a 23.4% y/y jump.

Treasuries were mixed, as the yield on the 2-year note was down 1 basis point (bp) at 0.87%, while the yield on the 10-year note rose 4 bps to 1.77%, and the 30-year bond rate gained 3 bps to 2.13%.

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