What you need to know this week

The December jobs report and details of the Federal Reserve’s final 2022 policy meeting will headline a short opening week of 2023 for investors as Wall Street enters the new year following its worst run since the Global Financial Crisis.

US stock and bond markets will be closed on Monday, January 2, for the New Year’s holiday.

After a quiet end to December, economic data will pick up as traders return to the four-day trading week.

The Labor Department will release its jobs report for December at 8:30 a.m. on Friday, and economists expect a gain of 200,000 jobs last month, according to the Bloomberg consensus estimate.

Outside of the headline jobs data, there will be three additional labor market updates for investors this week with the latest Job Openings and Labor Turnover Survey (or JOLTS report), ADP’s personal wage data and the Challenger Job Cuts report. it must all end.

Along with a flurry of labor market releases, the Fed will publish the reading of its December policy meeting, and investors will be looking for clues about the central bank’s next move. Last month, the Fed raised interest rates by 50 basis points, bringing the total increase in the benchmark policy rate to 4.25% in 2022.

Federal Reserve Board Chairman Jerome Powell holds a press conference at the Federal Reserve Building in Washington, U.S., December 14, 2022. REUTERS/Evelyn Hockstein

Global and US stocks closed their worst year since 2008 on Friday. Aggressive central bank measures to quell historic inflation and the war in Ukraine hit financial markets, ending a three-year winning streak for major indexes.

The S&P 500 has lost 19.4% in 2022, its biggest calendar-year decline since a 38% decline in 2008 during the Great Recession. The Dow outperformed its peers, falling a relatively modest 9%.

The Nasdaq Composite wiped out a third of its value, falling 33% and closing in on its first four-quarter decline since the dot-com bubble in 2000, as rising interest rates hurt tech stocks.

Even as investors turn the page in 2022, much of Wall Street expects more pain ahead.

Consensus strategists’ forecasts see a volatile first half of 2023 and an easier second half. Still, stocks are expected to be little changed or at best marginal gains — with the Federal Reserve projected to keep rates high for a sustained period.

“With the Fed’s aggressive rate hikes moving into 2023, there is too much investor concern about the possibility of a harder-than-desirable taper that could push the US and global economies into recession,” AXS Investments. CEO Greg Bassuk said in an emailed note.

“Investors continue to focus on employment, labor and related economic data as persistent wage strength could weigh on corporate profit margins and reduce returns across industries and sectors.”

The labor market has cooled in recent months, although demand for workers remains strong even as Fed officials continue their most aggressive monetary tightening campaign in decades.

The U.S. labor market has avoided any significant shock, while other areas of the economy, such as housing and manufacturing, have shown signs of slowing, despite policymakers proposing a rate hike worth 425 basis points in 2022.

While Wall Street’s consensus estimate for nonfarm payrolls growth last month was 200,000, that would be a slowdown from the 263,000 jobs added to the economy in November, when forecasts were roughly the same. The unemployment rate is also at a low level of 3.7%, while the labor force participation rate has not changed much.

“The lagged effect of Fed tightening through 2022 will slow economic activity in 2023, a natural consequence of the fight against inflation,” Richard Saperstein, chief investment officer at Treasury Partners, noted in a note. It forces the Fed to maintain high interest rates until 2023.

The minutes of the FOMC’s December meeting will likely show the thinking behind the central bank’s “slower but higher” regime. Fed Chairman Powell said he and his colleagues would move to smaller rate hikes to gauge payments, but ultimately could raise the terminal rate higher.

The December median forecast showed a new interest rate peak of 5%-5.25% in September, up from 4.5%-4.75%. The Fed’s 0.50% increase marked a drop from a steady 0.75% increase.

The FOMC is scheduled to meet Jan. 31-Feb. 1 and is expected to introduce its first rate hike in 2023 and the eighth of the current hiking cycle at the end of the deliberations.

Elsewhere on the economic calendar this week, readings on durable goods orders and PMI data will provide investors with the latest snapshots of industrial and manufacturing activity.

The offseason earnings calendar remains open, with several notable names including Conagra (CAG), Constellation Brands (STZ), and Walgreens Boots Alliance (WBA).

Economic Calendar

Monday: Markets are closed on New Year’s Day.

Tuesday: S&P Global Manufacturing PMIDecember Finals (46.2 expected, 46.2 last month); Construction costsduring the month, November (-0.4% expected, -0.3% in the previous month)

Wednesday: MBA Mortgage ProgramsWeek ending December 30 (up 0.9% over previous week); ISM Employment, December (48.4 in the previous month); ISM ManufacturingDecember (48.5 expected, 49.0 in the previous month); ISM New OrdersDecember (47.2 in the previous month); ISM Prices PaidDecember (42.9 expected, 43.0 in the previous month); JOLTS Job postingsNovember (10,100 million expected, 10,334 in the previous month); FOMC meeting minutesDecember 14; Chambers General Car SalesDecember (13.70 million, 14.14 in the previous month)

Thursday: Challenger Job Qualificationyear-on-year, December (416.5% in the previous month); ADP Employment ChangeDecember (140,000 expected, 127,000 last month); Trade balanceNovember (-74.5 billion dollars expected, -78.2 billion dollars in the previous month); Initial Unemployment ClaimsWeek ending December 31 (230,000 expected, 225,000 in previous week); Continuing ClaimsThe week ending December 24 (1,710 million during the previous week); S&P Global US Services PMIDecember Finals (44.4 expected, 44.4 last month); S&P Global US Composite PMIDecember Final (44.6 in the previous month)

Friday: Net Revision of Salary for Two MonthsDecember (-23,000 ago); Change in Off-Farm Labor WagesDecember (200,000 expected, 263,000 in previous month); Change in personal salary reportsDecember (167,000 expected, 221,000 in previous month); Change in Manufacturing WagesDecember (6,000 expected, 14,000 last month); Unemployment rateDecember (expected 3.7%, 3.7% in the previous month); Average Hourly Earningsmonth-on-month, December (expected 0.4%, 0.6% in the previous month); Average Hourly Earningsannualized, December (5.0% expected, 5.1% previous month); Average Weekly Hours All EmployeesDecember (34.4 expected, 34.4 in previous month); Labor Force Participation RateDecember (62.2% expected, 62.1% in the previous month); Underemployment rateDecember (6.7% in the previous month); ISM Services IndexDecember (55.0 expected, 56.5 in the previous month); ISM Services EmploymentDecember (51.5 in the previous month); ISM Services Fees PaidDecember (70.0 in the previous month); ISM Services New OrdersDecember (56.0 in the previous month); Factory OrdersNovember (-0.8% expected, 1.0% in the previous month); Factory Orders Excluding TransportationNovember (0.8% in the previous month); Durable Goods OrdersFinal November (-2.1% in the previous month); Non-Transportable Durable GoodsFinal November (0.2% in the previous month); Non-Defense Capital Goods Orders Excluding AircraftFinal November (0.2% in the previous month); Carriage of Non-Defense Goods, Except AircraftNovember Final (-0.1% over previous month)

Earnings Calendar

Monday: Markets are closed on New Year’s Day.

Tuesday: There are no notable reports scheduled for release.

Wednesday: UniFirst Corporation (UNF)

Thursday: AngioDynamics (ANGO), Conagra (CAG), Constellation Brands (STZ), Helen of Troy (HELE), Walgreens Boots Alliance (WBA)

Friday: There are no notable reports scheduled for release.

Alexandra Semenova is a correspondent for Yahoo Finance. Follow him on Twitter @alexandraandnyc

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