1:05pm: Eyes ahead to two key economic indicators
The major US indices closed quietly today, while Americans hunted for Black Friday deals or waited to watch the US-England World Cup soccer match this afternoon.
At the closing bell, the S&P 500 was down by 0.03% at 4,026, the Nasdaq Composite was down by 0.5% at 11,226, while the Dow Jones rose by 0.5% to 34,347 points.
Michael Hewson, chief market analyst at CMC Markets, said despite today’s quiet, post-US Thanksgiving session, there are key economic events teed up for next week.
First is Thursday’s US PCE price index reading for October, followed by the US jobs report for November on Friday, which includes the closely watched non-farm payrolls figure, Hewson wrote in a report.
“There’s been little evidence thus far that US consumer spending is showing signs of slowing, while the Fed’s preferred measure of inflation, the PCE Core Deflator has thus far continued to edge higher,” he wrote.
In September, the PCE Core Deflator edged up to 5.1% from 4.9% in August, although it is still below its February peaks of 5.4%, along with headline CPI peaking at 9.1% In June, Hewson wrote.
“Nonetheless if we start to see signs that we are starting to turn lower then we could well see the US dollar come under further pressure building on the recent declines that we’ve seen since the peaks of late September,” he said.
Despite concerns over the economic outlook, Hewson said the US labour market remains robust. In October the US economy added 261,000 jobs, beating the figure of 200,000 that economists had expected, but down from September’s upwardly revised tally of 315,000.
However, the unemployment rate edged up to 3.7% in October, versus 3.5% in September, while annual growth in average hourly earnings slowed to 4.7%, down from 5% a month earlier.
More recently, new claims for unemployment benefits rose to 240,000 in the week ending November 19, the highest total since August, he wrote, adding among those were people shed by Amazon, Meta and Twitter.
“A trend towards lay-offs does appear to be starting to build," Hewson said.
"That said, it is likely to take time to filter through to the official jobs report since high numbers of job vacancies imply that many job seekers will soon find new employers. It’s also important to remember that hiring tends to pick up around Thanksgiving and Christmas, driven by seasonal recruitment of temps."
He said 500,000 jobs are estimated to be added in November, while the unemployment rate will tick higher to 3.8%.
At the market close on Friday, major movers included Kroger, up by 2.4%, along with fertilizer manufacturer CR Industries which rose 2.3% and phosphate producer Mosaic was up by 2.2%
On the downside, Activision Blizzard fell by 4% after news that Microsoft’s pursuit of the company could be blocked by the FTC, dragging down both the S&P 500 and the Nasdaq Composite. Abermarle slid by 3.9% and mining company Freeport-McMoRan dropped by 2%.
9.35am: Black Friday in focus
US stocks kicked off Friday’s half-day of trading mixed in what is expected to be a largely quiet session.
Forex.com market analyst Joshua Warner noted there could be lower-than-usual trading volumes as investors approach the end of the shortened trading week.
“It may be a quiet day for the stock market, but there are hopes people will be busy shopping today as Black Friday kicks off,” he said.
“However, forecasts point toward sluggish sales growth at best, partly because most of them have been burdened by an inventory glut that has forced them to offer deeper discounts over longer periods, which could take more sales away from this weekend.”
He added, with earnings season winding down, attention was on what the Federal Reserve will do at its next interest rate meeting in December, with the latest FOMC minutes installing confidence that rates could rise at a slower pace going forward.
“Markets believe there is over a 75% chance that we will see a 50bps rise in interest rates next month, with the other 25% leaning toward another 75bps hike,” he said.
At the open, the Dow Jones Industrial Average had added 60 points or 0.2% at 34,254 points, while the S&P 500 was down 3 points or 0.1% at 4,025 points and the tech-heavy Nasdaq Composite struggled, down 57 points or 0.5% at 11,230 points.
6.30am: Bring on the sales
US stocks are expected to open slightly higher on the half-day return after the Thanksgiving holiday with trading likely to be quiet as many investors opt for a long weekend, while Black Friday sales will be a focus.
With US markets closing at 1.00pm ET today, futures for the Dow Jones Industrial Average were up 0.2% in pre-market trading, while those for the S&P 500 were 0.2% higher, and contracts for the Nasdaq-100 were flat.
For now, investors and retailers alike will focus on the Black Friday sales which are key, especially after some recent mixed earnings from retailers, including gloomy guidance from the likes of Target.
Investors still worry that the world’s biggest economy is heading for a prolonged recession and a strong holiday sales season will help allay some of those fears.
Earlier this week, minutes from the last Federal Open Market Committee meeting in early November revealed that the rate-setting body saw little evidence that inflationary pressures were easing. Rate setters are committed to raising interest rates as high as necessary to bring inflation under control, which would mean less spending and lower overall growth for that to happen. The news dampened sentiment.
The Fed has delivered four consecutive 75 basis point interest rate hikes this year in as many outings. While many hope that recent data showing an easing in the headline inflation rate will lead to a scaling back in further interest rate increases, the likelihood of more rate hikes remain.
Elsewhere, China's central bank on Friday signaled lower reserve ratios for banks, and conducted reverse repo operations to boost liquidity in the system, as news of fresh Covid restrictions continue to creep in, noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The news is important amid concerns that slowing growth in China will dampen economic activity across the globe.
“The Chinese news certainly prevents oil bulls from jumping in the market right now, and the American crude consolidates below $80 per barrel this morning, with solid offers seen at the $82/85 range,” added Ozkardeskaya.
Contact the author at jon.hopkins@proactiveinvestors.com