US stocks edged higher as investors grew confident that the Fed is nearing the end of its tightening cycle as the manufacturing sector is clearly in a recession, while the labor market refuses to break. This stock market rally however might be short-lived as the ISM report and JOLTS data painted a picture of a resilient labor market that should force the Fed into taking rates even higher into restrictive territory.
The ISM report delivered a second contraction reading and the ninth straight decline for prices paid. The ISM employment index rose into expansion territory, which reinforces the belief that skilled labor shortages remain huge.
The JOLTS data showed that 10.46 million jobs were available in November. The labor market remains robust when you look at both economic data releases. The Fed won’t see wage pressures ease anytime soon, which means we should not be surprised if they deliver at least a couple more rate hikes.
Salesforce is the next big tech giant to announce a restructuring plan. Co-CEO Benioff said in a letter to employees, “The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions.” The CRM software giant will reduce its staff by about 10%, which is not that big of a downturn considering they tripled their workforce over the past five years.
This is the quarter everyone will announce layoffs and cost-saving measures. Labor market weakness will become the dominant theme here and that should provide added support to the disinflation trends.
The Australian dollar shot up like a lightning bolt after reports China was considering a partial end to an Australian coal ban. This decision could trigger a major supply swing and trigger a wave of investment into Australia. The Australian economic outlook is turning optimistic and that could keep flows into Aussie-dollar growing.
Bitcoin remains confined to its tight trading range that has been placed over the past few weeks. Bitcoin is getting a minor boost today as risky assets rally as more signs emerge that inflation is coming down. Disinflation trends might be improving in Europe, but the US outlook is getting complicated by a strong labor market. Cryptocurrencies seem unfazed by all the warnings coming from all the banking regulators.
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