US Stocks Poised To Extend New Year Slump As Focus Shifts To December Jobs Data: Analyst Sees S&P Testing 4,800 On This Condition

Stocks could be headed lower yet again on Friday, with the market off to a rocky start for the year. Technology stocks are getting thrashed amid the risk aversion in play. The all-important jobs report holds the key to determining the day’s trading direction.

Important metrics to track, according to LPL Chief Economist Jeffrey Roach, are the flow of individuals entering the labor force and the ratio of part-time workers to full-timers. More people coming off the sidelines will increase the unemployment rate, he said.

A stronger-than-expected report could push yields higher, creating further downward pressure on the market.

Cues From Thursday's Trading:

The stock market continued to grind lower in the new year, with the major averages trading mostly lower on Thursday. The weakness was the result of investors’ skepticism regarding the ability of the market to sustain the strong upward momentum seen for much of 2023 amid the uncertain macroeconomic backdrop.

ADP’s private sector payrolls report showed bigger than expected job gains and the weekly jobless claims fell more than expected in the recent reporting week, while S&P Global’s service sector survey showed anemic expansion in December, in line with expectations. Both the labor market reports vouched for the strength of the labor market, casting a cloud on a Fed rate cut.

The major averages opened the session slightly but reversed course in early trading. The broader S&P 500 Index and the 30-stock Dow Industrials hovered mostly above the unchanged but diverged at the close. The Dow ended marginally higher, while the latter settled modestly lower.

Techs once again acted as the biggest drags, and the tech-heavy Nasdaq Composite traded below the unchanged line for the better part of the session before ending moderately lower. Consumer discretionary and energy stocks also pulled back notably.

US Index Performance On Thursday

Analyst Color:

Even as the rally peters out, a fund manager sounded optimistic about the near-term market outlook, although his positive opinion is premised on one condition.

Louis Navellier said, ”Now we get ready for the opening salvo of the earnings season next Friday when JP Morgan Chase & Co. JPM reports.” “If the earnings growth projections for ’24 for the S&P hold, approximately 10%, we should be testing 4,800 again soon,” he added.

Futures Today

Futures Performance On Friday

Upcoming Economic Data:

The Labor Department is scheduled to release the December non-farm payrolls report at 8:30 a.m. EST. Economists, on average, expect job gains of 130,000 for the non-farm sector in December, down from 150,000 in November. The jobless rate, based on the household sector, is expected at 3.8%, a tick up from the previous month’s 3.7%. The annual rate of change in the average hourly earnings – an inflation, measure is estimated to be 3.9% compared to 4% in November.

The Institute of Supply Management will release its non-manufacturing purchasing managers’ index at 10 a.m. ET. The index is expected to come in at 52.6 for December, roughly in line with the 52.7 reported for November.

The Commerce Department is due to release its factory goods orders data at 10 a.m. ET. The consensus estimate calls for a 2.1% month-over-month increase in factory goods orders in November, reversing some of the 3.6% drop in October.

Richmond Fed President Thomas Barkin is scheduled to speak at 1:30 p.m. ET.

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Stocks In Focus:

• Palantir Technologies, Inc. PLTR declined over 3% in premarket trading on an analyst downgrade.
• Peloton Interactive, Inc. PTON rose about 3% after it rallied nearly 14% on Thursday in reaction to its partnership with
• Medical Properties Trust, Inc. MPW plunged 15% after it announced it has allowed its largest tenant to defer rent payment and will extend additional loans to it.
• AngioDynamics, Inc. ANGO, Constellation Brands, Inc. STZ and Greenbrier Companies, Inc. GBX are among the companies scheduled to report quarterly results ahead of the market open.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rose 0.42% to $72.61 in early European session on Friday, reversing some of Thursday’s 0.70% loss. The rebound came amid an announcement from Danish shipping giant Maersk said it would divert its vessels away from the Red Sea for the foreseeable future. Tensions in the Red Sea are driving up prices as crude oil shipments would have be to rerouted through a circuitous route, pushing up transportation costs.

The benchmark 10-year Treasury note fell 0.051 percentage points to 4.042% on Friday.

The major Asian markets fell mostly, led by China, as they reacted to the negative close on Wall Street overnight. Traders in the region also opted to stay on the sidelines to see off the U.S. jobs data. The Japanese, Indian, and Singaporean markets, however, notched up modest gains.

European stocks traded sharply lower on Friday amid a mixed inflation report from the region and caution ahead of the U.S. jobs data.

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