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Weak Manufacturing Data Increases Focus on Jobs Numbers.
Good morning. I'm Amrith Ramkumar, preparing you for today's jobs report after another rough day for stock investors.
Futures are rising after yesterday's slump, with fears about slowing global growth continuing to grip markets.
After U.S. manufacturing data spooked analysts Wednesday and Thursday, I explain why the figures and investor expectations for no Federal Reserve interest-rate increases this year are making this morning's jobs data even more critical.
Markets in a Minute
Global stocks climbed Friday, staging a partial rebound from Thursday’s steep losses after China confirmed a two-day meeting with U.S. representatives to work to resolve the countries’ trade dispute.
Fed-Investor Divide Heightens Focus on Friday's Jobs Report
The central bank is still projecting two interest-rate increases this year.
Tepid economic figures this week and a gap in interest-rate expectations between investors and the Federal Reserve raise the stakes for Friday’s jobs report.
U.S. factory activity and business confidence among manufacturers are at their weakest levels in more than two years, figures from the Institute for Supply Management and IHS Markit this week showed. The data were a shift from late last year, when economic figures generally held up even as the stock market sank in the fourth quarter.
The most-recent jobs report showed employers added fewer jobs than expected in November, although the unemployment rate held steady at 3.7% and year-over-year wage growth matched October's 3.1%, which was the best rate since 2009.
For Friday’s report, economists are predicting U.S. employers added 176,000 jobs last month, up from 155,000 in November, while the unemployment rate edged down to 3.6%.
But the downbeat economic reports from earlier this week and another leg down for U.S. stocks on Thursday are amplifying worries that tariffs and interest rates will lead to a larger-than-expected slowdown in U.S. growth.
“Trade issues are now hitting the U.S. data and it’s hitting the hard data in a way we have just not seen,” said Torsten Slok, chief international economist at Deutsche Bank.
And even a strong report Friday may not prove a solace. If anything, it could jolt markets again, analysts say, by raising fears that the Fed will continue to raise interest rates. Investors now widely expect the central bank to hold rates steady this year or even lower them by December, CME Group data show.
The Fed’s projections released after its latest meeting last month showed the central bank is still targeting two increases for 2019. Analysts say this disconnect could stoke volatility throughout the year.
On Friday, investors will particularly hone in on wage-growth figures for the latest indications of any builidng inflationary pressure. That is something that could shift views that the Fed will soon stand pat.
“The one factor that could force the Fed to become more hawkish is signs of inflation, and we may very well get higher wage growth,” said Kristina Hooper, chief global market strategist at Invesco.
Apple's 10% slide marked its largest one-day drop since January 2013 and pushed the stock to its lowest level since April 2017. It shed nearly $75 billion from the company's market value, roughly the size of Qualcomm, General Electric, Morgan Stanley or Caterpillar, according to Dow Jones Market Data.
Both two-year and 10-year U.S. Treasury yields fell more than 0.1 percentage point on Thursday, their largest one-day declines since May 29. Half of investors now expect the Fed to cut rates this year, up from about 10% a day earlier, CME Group data show.
On this day in 2000, the Nasdaq plunged a then-record 229.46 points, or 5.55%, to close at 3901.69. Internet stocks were hammered the hardest, as CMGI and Yahoo! each lost a third of their value. The tech-heavy index fell 3% to 6463.50 Thursday.
Payrolls, unemployment and wages for December will be reported Friday at 8:30 a.m. ET.
Fed Chairman Jerome Powell will join a panel with his predecessors Janet Yellen and Ben Bernanke at the American Economic Association meeting in Atlanta at 10:15 a.m. Other central-bank officials will also speak during the group's meeting this weekend.
Natural-gas inventories are scheduled for 10:30 a.m. Stockpiles are expected to have fallen by 49 billion cubic feet last week—much less than normal for this time of year—per the average target of nine analysts and traders surveyed by the Journal.
Crude-oil stockpiles will be published at 11 a.m. Inventories are projected to have dipped 2.5 million barrels during the week ended Dec. 28, according to the average estimate of 11 analysts and traders.
The Baker-Hughes rig count will be released at 1 p.m.
Daniel Loeb, chief executive officer of Third Point LLC, speaks during a 2017 conference in Las Vegas PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
Daniel Loeb’s 2018 loss was the worst since the 2008 financial crisis. Activist hedge-fund firm Third Point, one of the most prominent in the industry, lost about 11% last year.
More first-time home buyers are turning to the bank of mom and dad. Among borrowers using FHA loans, which come with low down payments, more than 26% tap relatives for financial help. That’s up from 22% in 2011.
What happens when bond markets get weird. In the bond markets, traders are placing bets on whether the Fed will soon be forced into reverse by a slowing economy and swooning stock market. That has led to a lot of weirdness, writes James Mackintosh.
Former bankers were arrested over Mozambique deals. Three former Credit Suisse bankers were arrested Thursday in London in connection with a $2 billion fraud scheme, according to a statement by the U.S. Department of Justice.
Treasurys are continuing to rally into 2019. The nearly two-month long rally in U.S. government bonds continued into the new year as investors scooped up safer assets in the wake of soft Chinese manufacturing data.
What We've Heard on the Street
“While there are enough problems looming to expect the economy will, in fact, slow down this year, December’s drop probably isn’t nearly as scary as it seems.”