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Tech Decline Persists Ahead Of Jobs Report

As the tech decline persists ahead of jobs report, let's delve into its effects on financial markets, Treasury yields, and the broader economic outlook.

Paula M. Graham
Jan 05, 20244569 Shares89592 Views
Tech decline persists ahead of jobs report, signaling a cautious mood in the financial markets. Treasury yields rose and stocks dipped as traders looked to Friday’s jobs report for clues on how soon and deeply the Federal Reserve can start cutting interest rates.
The Nasdaq 100 slipped 0.5%, logging a five-day losing streak — the longest such run since December 2022 — as investors booked profits on last year’s winning tech stocks. Apple Inc. tumbled after its second downgrade this week as Piper Sandler flagged concern about iPhone inventory levels. The S&P 500 ended the session 0.3% lower after a choppy session.

Evaluating The Economic Indicators

The financial market's reaction reflects growing anticipation and uncertainty. The rise in ten-year Treasury yields, reaching 4%, is a significant indicator. This increase comes in the wake of data showing an uptick in U.S. hiring in December and jobless claims that were lower than expected. These figures are critical as they influence the Federal Reserve's decisions regarding interest rates, which affect a wide range of financial activities, from mortgage rates to business loans.
Ian Lyngen, a strategist at BMO Capital Markets, points out the implications of this data on policy decisions. “There was nothing within the data that would suggest any urgency from policymakers to begin normalizing rates lower during the first quarter,” he stated. This suggests that the market might not see an immediate reduction in rates, which is a key factor for investors.

The Labor Market And Future Projections

Attention is now focused on the upcoming U.S. jobs report. This report, alongside European inflation data, will be pivotal in assessing whether central banks, particularly the Federal Reserve, can start to lower interest rates. Current wagers on a rate cut in March have been diminishing as the labor market appears robust. This is further supported by the Federal Reserve's December meeting minutes, which hinted that rates could remain high for a considerable period.
Economists polled by Bloomberg predict that nonfarm payrolls likely saw an increase of 175,000 in December, with a slight uptick in the unemployment rate to 3.8%. Ben Jeffery from BMO opines, “We’re biased for Friday’s data to give the Fed cover to hold rates high for an extended period of time as the FOMC Minutes suggested.”

Market Reactions And Corporate Movements

The market’s reaction extends beyond the tech sector and Treasury yields. In the corporate world, significant events have occurred. GOP presidential candidate Vivek Ramaswamy sold about $33 million worth of shares in his biotech company Roivant Sciences Ltd. Meanwhile, Endeavour Mining Plc saw its stock fall in Toronto after firing its CEO for serious misconduct.
The fast-food giant McDonald’s Corp. also reported a weakening in its shares, attributing it to boycotts in the Middle East. These corporate developments, along with the broader economic indicators, paint a complex picture of the current financial landscape.

Looking Ahead - Key Economic Events

In the coming days, the market will closely watch several key events. These include the Eurozone CPI and PPI data, U.S. nonfarm payrolls/unemployment, factory orders, and the ISM services index. Furthermore, a speech by Richmond Fed President Tom Barkin, an FOMC voter in 2024, is also anticipated.

Conclusion

In summary, the financial markets are in a state of heightened sensitivity as they navigate through a mix of corporate news, economic data, and policy projections. The upcoming U.S. jobs report, in particular, is poised to be a significant determinant in shaping the near-term economic outlook and the Federal Reserve's interest rate decisions.
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