Morning Briefing

In January jobs surprise economy adds 517,000 jobs–maybe

In January jobs surprise economy adds 517,000 jobs–maybe

Today, Friday, February 3, the Bureau of Labor Statistics reported that the U.S. economy added a whopping 517,000 jobs in January. Economists had been expecting more along the lines f 50,000 jobs added in the month. The huge January surge took the headline unemployment rate to 3.4% The last time the unemployment rate was this low was May 1969. On the surface, the stronger, the much stronger, than expected job gain in January will put pressure on the Federal Reserve to continue raising interest rates. If the labor market is booming, it’s hard o see inflation coming down rapidly. But the real story here may be beneath the surface.

Sell any post-Fed rally–stocks are way ahead of themselves on the Fed, interest rates, and inflation

Sell any post-Fed rally–stocks are way ahead of themselves on the Fed, interest rates, and inflation

Here’s what I expect on Wednesday. The Federal Reserve’s Open Market Committee will announce a 25 basis point interest rate increase. In his post-meeting press conference Fed chair Jerome Powell will try to talk the financial markets out of their exuberance by stressing that the Fed doesn’t see a quick end to interest rate increases because at 5% inflation is still running way ahead of the Fed’s 2% target rate. And I expect that investors and traders will ignore Powell’s comments and bid stocks high because a pause in rate increases is just around the corner–maybe as early as March–and financial markets can look for the Fed to begin cutting interest rates in the second half of the year. To which I say, Bushwah! I would sell any post-meeting rally. March increasingly looks like the month where reality will whack the markets on its head.

Consumer spending drops again in December

Consumer spending drops again in December

Consumer spending, the bulwark of the economy and the reason we had the very positive (2.9%) year-over-year GDP growth rate in the fourth quarter that was announced yesterday, fell by 0.2% in December from November, the Commerce Department reported today, Friday, January 27. After adjusting for inflation, consumer spending fell 0.3% in the month. Today’s report also adjusted the November figures to show a small drop in consumer spending for November. The initial report for that month showed a slight increase.

Wall Street has second thoughts on yesterday’s Microsoft earnings

Wall Street has second thoughts on yesterday’s Microsoft earnings

Yesterday, shares of Microsoft (MSFT) rose by more than 4.6% on an earnings report for the December quarter that showed the company slightly beating analyst estimates on earnings and training only slightly on revenue. Today, investors and traders had second thoughts. The stock was down as much as 4.6% in morning trading (That’s down from the close yesterday and not from the after-hours price.) The stock ended the day down just 059% but that was enough to erase all the after-hours gains from the previous day. So what caused the second thoughts?

How many people have died from Covid in China? All we know is that the government is lying and that the stock market is about to get a big boost

How many people have died from Covid in China? All we know is that the government is lying and that the stock market is about to get a big boost

In the week leading up to the Lunar New Year festival, the official count for the number of Covid deaths in China after the chaotic end of the country’s 0-Covid policy was 12,658. That brought the total reported by China’s Center for Disease Control and Prevention to an official 59,938. Outside experts calculate that the true total is much, much higher. Airfinity, a healthcare data crunch puts the number at 640,000.

Economy down but stocks up? Remember that the economy doesn’t equal the stock market

Economy down but stocks up? Remember that the economy doesn’t equal the stock market

This may seem perplexing: Alphabet (AKA Google) announced that it would cut 12,000 jobs just days after Microsoft (MSFT) said it would cut 10,000 jobs. And stocks, especially technology stocks, rallied. The Standard & Poor’s 500 closed up 1.89% today and the Dow Jones Industrial Average ended the day up an even 1.00%. The technology-heavy NASDAQ Composite finished up 2.66% and the NASDAQ 100 wound up climbing 2.86%. But remember that the economy doesn’t equal the stock market

U.S. economy shows solid 2.9% growth in the fourth quarter, but…

Retail sales dip in December–is the consumer showing signs of weakness?

U.S. retail sales fell 1.1% in December from November, the Department of Commerce reported this morning. Commerce also revised November sales figures to show a drop of 1% from October instead of the originally reported 0.6% decline. The figures are seasonally adjusted (which always introduces an element of uncertainty) but they don’t reflect price changes and some of the month-to-month drop could be a result of declining inflation. The decline might be a reflection of a falling inflation rate in November and December. Could be. Or maybe consumers are cutting back on spending as they anticipate a slowing economy or as they read about another big tech industry layoff.

So it begins: Treasury announces first deferrals to stave off debt ceiling crisis

Start your debt ceiling crisis clock running NOW!

The Biden administration will act starting on January 19 to reprioritize federal funds in order to put off a debt ceiling crisis until June, Treasury Secretary Janet Yellin told Congress in a letter today. The “extraordinary measures” which should be old hat at Treasury by now from past crises, are intended to prevent the U.S. government from breaching the debt ceiling until, at least, early June. That would, theoretically, give Congress time to pass legislation raising or suspending the country’s borrowing cap past its current level of $31.4 trillion. Otherwise, the U.S. government would experience a historic default, which Yellen said could cause “irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.” Theoretically

Stocks can’t quite decide what to make of today’s CPI inflation report

Stocks can’t quite decide what to make of today’s CPI inflation report

Inflation, measured by the headline CPI (Consumer Price Index) fell 0.1% in December versus November. That brought the annual headline inflation rate to 6.5%. That was exactly what a consensus of economists was looking for. The core DPI, which strips out more volatile food and energy prices, rose by 0.3% in December from November. That brought the annual core inflation rate to 5.7%. Again, exactly what economists had forecast. (Remember, the inflation rate peaked at 9.1% this summer.) The stock market didn’t know quite what to do with this inflation reading, however.