US stock dropped yesterday
Thursday has been a negative day for Wall Street.
The S&P 500 closed at -1.16%, the Nasdaq ended the market session at -1.47% and the Dow Jones closed at -1.02%.
The decline has been driven by the latest labour data which are stronger than expected.
ADP (NASDAQ:ADP) Nonfarm Employment Change and Initial Jobless Claims for December
Yesterday, December's payroll reports have shown more hiring than expected and fewer initial jobless claim than anticipated.
During the last month of 2022, US companies added more jobs than predicted, especially due to small- and medium-sized enterprises.
The initial jobless claim for the month of December is 204,000 versus the 225,000 forecasted.
The above data have shown that the labour market is still strong and the Federal Reserve cannot stop its tightening monetary policy yet.
Today's unmissable data
The economic calendar today is very important as the market will be impacted by the following reports:
- Nonfarm Payrolls that measure the change in the number of people employed during the previous month, excluding the farming industry
- U.S. Unemployment Rate which is the percentage of the total workforce that is unemployed and actively seeking employment during the previous month.
Investors have all eyes on both data that are going to be released today at 1:30 pm GMT.
What will be the Fed’s next move?
The Fed's primary goal at the moment is to reduce the high inflation and bring it back to the 2% target.
A series of interest rate hikes is the key used by the Fed to fight inflation.
The jobs report for the month of December will give us a clue regarding the next Federal Reserve next action.
If the labour market remains strong and wages are increasing, inflation will not slow down which is exactly what the Fed doesn't want to see.
Most probably, the US central bank will not slow down the interest rate hikes and therefore there will be an increased risk of recession in the near future.
Sentiment Indicator - Fear & Greed Index
The market sentiment is at 44 still in the "Fear" mode which is higher than yesterday.
FedWatch Tool - FED rates probabilities
60.1% of investors are expecting the FED to increase the interest rates by 0.25% at the next meeting.
The remaining 39.9% are expecting a 0.50% rate increase.
The number of investors expecting a rate increase of 0.50% is getting higher compared to yesterday.
No other options are considered at this time.
The next FED meeting is on 1 February 2023.
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