This week, US equity investors will be particularly focused on the labor market as mega-cap firms commence the fourth-quarter earnings season amid a holiday-shortened week. The critical data points scheduled for release include job openings and hiring statistics on Tuesday, followed by the ADP private payroll figures and the minutes from the recent Federal Open Market Committee meeting on Wednesday, December 17-18.
The latter part of the week will see Challenger layoff intentions reported on Thursday, leading into the much-anticipated nonfarm employment report due on Friday. Additionally, Thursday is designated as a National Day of Mourning for the funeral of former US President James Carter, which may influence market activities. Analysts from Oxford Economics offer insights regarding the December nonfarm payrolls, projecting that robust figures could reinforce the Federal Reserve's resolve to adopt a more measured approach in normalizing interest rates.
According to their research, the Fed is expected to lower rates three times this fiscal year, although they caution that the prevailing risks lean towards fewer rate cuts than anticipated. Long-term interest rates have been on the rise, capturing the attention of market participants. Nancy Vanden Houten, Lead US Economist at Oxford Economics, notes a pivotal question: are home buyers and sellers acclimatizing to the elevated mortgage rates, or will these high rates disproportionately impact residential investment in 2024? Presently, the US 30-year fixed mortgage rate has increased by 22 basis points over the past month, and a sustained breach beyond the 7% threshold could lead to significant market implications. In the context of earnings reports, Bank of America, Wells Fargo, and BlackRock stand out as notable companies in investors' sights this week.
Additionally, Delta Airlines and Constellation Brands are among the firms reporting earnings. Investors should also pay close attention to the technology sector, particularly firms like Nvidia, as key announcements are anticipated during the upcoming Consumer Electronics Show in Las Vegas, Nevada, which opens on Tuesday. Amidst these developments, geopolitical factors also come into play, particularly in Canada, where investors will be observing for any political shifts leading to Donald Trump’s anticipated swearing-in as US president.
Prime Minister Justin Trudeau is reportedly weighing the possibility of stepping down, although he has not yet made a definitive announcement regarding his political future, as reported by Reuters. This week presents a critical juncture for investors, as labor market data, corporate earnings, and political developments converge to shape market expectations and strategies for 2024..