On December 2, the three major U.S. stock indexes collectively opened lower the Dow Jones Industrial Index fell more than 300 points at the beginning of the session; the U.S. dollar index rose straight up and strengthened.
Analysts said that before opened that day, the U.S. non-farm payrolls data for November released by the U.S. Department of Labor far exceeded market expectations, implying that the job market is still very strong and the Fed needs to continue to curb inflation, which weakened market expectations for the Fed to slow interest rate increases.
In fact, the current risk factors in the US stock market have continued to accumulate, Wall Street institutions are even bearish on the US stock market next year.
US stocks fell sharply
On December 2, the three major US stock indexes opened sharply lower.
According to Wind data, as of 22:35 Beijing time, the Dow Jones Industrial Index, Nasdaq Index , and S&P 500 Index fell 0.88%, 1.31%, and 1.10% respectively.
The U.S. dollar index rose sharply and strengthened. As of 22:34 Beijing time, the U.S. dollar index was at 105.1478, with the intraday increase of and being 0.42%.
In terms of news, on the evening of December 2, Beijing time, the U.S. Department of Labor released data showing that the number of non-agricultural employment in the United States increased by 263,000 in November. The market expected an increase of 200,000, and the previous value was an increase of 261,000. The U.S. unemployment rate in November was 3.7%, in line with market expectations and unchanged from the previous value.
The market's expectations for the Fed to slow down interest rate hikes have cooled
The previous market view was that if the non-farm employment growth announced tonight slows down as expected, it will encourage the Fed's "dovish" attitude. What impact will the current higher-than-expected employment data have on the Fed’s policy shift?
After the release of the U.S. non-farm payroll data in November, Richmond Fed President Barkin expressed his opinion that labor shortages have helped solve the Fed's inflation problem, and that reduced labor will limit economic growth and put pressure on inflation; in the context of excess household savings and fiscal stimulus, the Fed's efforts to restore demand balance will not be easy, and the Fed has clearly planned to take more measures to combat inflation.
Mike Bell, global market strategist at JPMorgan Chase , believes that market forecasts for a U.S. economic recession are now more widespread than at any time in the past 50 years. If the labor market holds up next year and wage growth remains strong, forcing the Fed to continue raising interest rates further than markets expect. Rising unemployment could help lower wage growth and core inflation and allow the Federal Reserve to cut interest rates at some point next year or in 2024. He said, “We are in a situation where good news for the U.S. economy is bad news for the U.S. stock market, and vice versa.
Tim, chief investment officer of Orion Advisory Solutions Holland said a better-than-expected nonfarm payrolls report is good news for U.S. workers and bad news for risk assets (at least in the short term) because it supports the Federal Reserve's continued hawkish monetary policy. It also pointed out that the jobs report is retrospective and that continuing jobless claims have been rising. The labor market is likely to slow sharply in the first half of 2023, forcing the Federal Reserve to consider a dovish policy stance sooner than many expect.
China Galaxy Securities macro analyst Xu Dongshi believes that judging from the labor data in recent months, the supply-side problems in the U.S. labor market have not significantly improved. The supply-side problem in the U.S. labor market cannot be solved by raising interest rates. The Fed can only It can force companies to reduce employees by hitting aggregate demand, balancing the supply and demand of labor from the demand side. Therefore, we cannot expect changes in employment data to change the Fed's tightening path in the short term. Ultimately, the path of interest rates still depends on changes in U.S. inflation.
Wall Street is bearish on U.S. stocks in 2023
U.S. stocks fell sharply at the opening just because of an employment report? Analysts said that currently, the prospects for U.S. economic growth are unclear, liquidity in the U.S. stock market continues to tighten, and waves of layoffs by U.S. companies are happening one after another, and risk factors in the U.S. stock market have continued to accumulate. Wall Street institutions are even bearish on the U.S. stock market in 2023.
Binky, Deutsche Bank Strategist Chadha predicts that U.S. stocks will fall to new lows in the third quarter of 2023 as the U.S. economy enters recession.
Michael Wilson, chief equity strategist at Morgan Stanley , also believes that the bear market in U.S. stocks is not over yet. He predicts that the S&P 500 Index will bottom out in the first quarter of 2023, ranging from approximately 3,000 to 3,300 points. At that time, the Federal Reserve will stop raising interest rates, and the index will rise to 3,900 points by the end of next year.
At the same time, Wilson warned that due to the joint impact of rising labor costs and the weakening of corporate pricing power, the profits of U.S. stock companies will fall by 11% in 2023 and experience a "Davis double kill."
The JPMorgan Chase strategy team also said that U.S. stocks may fall sharply in the first half of 2023 against the backdrop of a mild recession in the U.S. economy and the Federal Reserve raising interest rates . By then, the S&P 500 will fall back to its lowest point since 2022 (3491.58 points), which also means a drop of about 12% from current levels. (Picture source in the article is Wind)
editor: Zhang Jing
