Market Update: Friday, January 6, 2017


  • Markets shrug off jobs report, up modestly. (10:17am ET) Major indexes are trading higher today despite a below-consensus U.S. nonfarm payrolls report. This follows a down-and-up trading session Thursday as stocks sold off early but recouped losses to finish near flat. The Nasdaq (+0.2%) outperformed the S&P 500 (-0.1%) and Dow Jones Industrial Average (-0.2%). Sector performance was mixed as healthcare stocks led to the upside, while financials fell more than 1% on declining yields. Overnight, the Shanghai Composite slid 0.4% while the Nikkei shed 0.3% on trade concerns and yen strength. While European markets are lower across the board, they recovered some losses after the jobs report; the STOXX Europe 600 is down just 0.1%. Elsewhere, WTI crude oil ($53.93/barrel) continues to find a bid, up 0.3% this morning, COMEX gold ($1177/oz.) is modestly lower after gains each day this week, and the yield on the 10-year Treasury note has reversed some of yesterday’s decline, now trading at 2.40%.


  • December jobs report headline disappoints, but details solid and Fed still on track for 2-3 rate hikes in 2017. The economy created 156,000 net new jobs in December 2016, falling short of the consensus expectation (per Bloomberg News) of a 175,000 gain. Despite the headline miss, the rest of the report was solid with large upward revisions to prior months’ job counts, suggesting that the labor market continued to tighten as it approaches full employment. We’ve noted in the past that Federal Reserve Bank (Fed) officials have said that monthly job growth of as low as 80,000 per month would be sufficient to tighten the labor market as we approach full employment. The acceleration in average hourly earnings in December to 2.9% year over year from 2.5% in November is evidence of that.
  • Week ahead. The consumer is in focus next week with reports on December retail sales and consumer confidence as well as November consumer credit highlighting an otherwise quiet week for data, as is typical for the week after the monthly jobs report is released. A handful of Fed speakers are on tap next week after a year-end and early-year lull, including an appearance by Fed Chair Janet Yellen on Thursday at a town hall event in Washington, D.C. Overseas, China will release its December economic data next week, and central bank meetings in Brazil, South Korea, and Poland are on tap, with Brazil expected to cut rates. In addition, the Q4 2016 earnings reporting season unofficially begins next week, as firms begin to report sales and earnings for Q4 2016 and guidance on 2017.
  • Where is the volatility? The S&P 500 has now gone 59 consecutive days without a 1% drop, one of the longest streaks going back 45 years and the longest such streak since 66 in a row during the summer of 2014. Additionally, the S&P 500 hasn’t had a 1% intraday move for 14 consecutive sessions. Over those past 14 sessions, the range on the S&P 500 has been 1.8%, one of the tightest 14-day ranges since 2013. Turning to the CBOE Volatility Index (VIX), it dropped nearly 17% in the first three days of 2017, for the second-largest drop to start a year ever (2013 was down 23.2%). Also, it has been lower each of the first three days of the new year for the first time since 2013 (which was eventually down five in a row). The all-time record to start a year is down six days in a row in 2010.





  • China: Imports and Exports (Dec)

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