Why do leading indices increase and sharply fall?
Today, and after NFP numbers, the market had a mixed reaction and even antithetic, why so? Let's first review the data.
It was not just about non-farm payroll, we other data as well, including had average earnings, unemployment rates, factory orders, and purchasing managers’ index.
Non-farm payroll: 210, VS 550K expected and 546K of October.
Average Weekly Hours (Nov): 34.8, up from 34.7
Average Hourly Earnings (YoY) (YoY) (Nov): Unchanged at 4.8%
Unemployment Rate (Nov): Down to 4.2%, down from 4.6%
Markit Composite PMI (Nov): 57.2, more than 56.5 expected
Services PMI (Nov): 58.0 more than expected 57.0
Factory Orders (MoM) (Oct): 1%, more than 0.5% expected.
ISM Non-Manufacturing PMI (Nov): 69.1, up from 66.7
Data in general showing that the economy is growing fine, and factory orders also increasing. In the labor market also, despite the lower created jobs, the unemployment rate fell to 4.2%. A lower unemployment level probably means that the numbers of self-retired and self-employed are increasing. Add these numbers to the layoff numbers that we had yesterday, at its lowest level since 1993, then we can understand that labor shortage can still be a concern.
As a result, we have the employment level decreasing to its lowest level since the pandemic hit the economy, and layoff numbers at their lowest level in the past 28 years. These numbers show that the labor market is in a good shape, and recovering fine.
Better than expected ISM manufacturing data in line with positive PMI numbers and factory orders, all telling that manufacturing and services sectors also improving, so next months, still we have to see increasing retails sales numbers.
And finally, higher average earnings also increase the possibility of higher inflation in the coming months, therefore expecting hawkish policies still weighing on the stock markets, even if Omicron concerns do not increase. However, the World Health Organization said it has now detected the Omicron variant of Covid-19 in 38 countries, up from 23 only two days ago. The latest data show that Omicron is not only more contagious than the Delta variant, but it is more likely to affect younger age groups.
