Tech stocks remained under pressure after a robust private payrolls report sent Treasury yields higher. Equity traders are still betting on a strong US economy and that has them rotating out of big-tech and embracing cyclicals. Ahead of what will likely be some rather hawkish Fed minutes, with the exception of the rotation trade, US stocks are struggling for direction. The first half of the year will be all about a strong US growth outlook that should benefit cyclical stocks, but a sustained pullback with tech stocks is not justified given the Fed hasn’t officially started their interest rate hiking cycle.
ADP crushes consensus
ADP’s private payroll report shows the labor market remains super tight and that compliments the latest JOLTS report, Homebase small business employment data, jobless claims, and ISM employment index. The upcoming nonfarm payroll report could come in much better than the 424,000 forecast and if it doesn’t traders will just expect the following month to make up for the miss.
ADP Chief Economist Richardson noted, “Job gains were broad-based, as goods producers added the strongest reading of the year, while service providers dominated growth… private sector payrolls are still nearly 4 million jobs short of pre-COVID-19 levels.”
Some traders are shrugging off the strong report as the data for this report does not include much of the omicron impact. The omicron impact could have a bigger impact with the January nonfarm payroll report, but regardless, the labor market recovery should pick up by the Fed’s live policy meeting in March.
Bitcoin is slightly higher as it is bouncing off key support that has been in place since last month. Bitcoin is in desperate need of a catalyst as crypto traders struggle to buy ahead of the beginning of a Fed rate hiking cycle. The cryptoverse remains long-term bullish with bitcoin and ethereum but the short-term downward move might not be over. Bitcoin has key support at the USD 45,500 level and after that it could be a freefall to USD 40,000.
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