US stocks are declining after Wall Street digested hawkish Fed minutes, robust labor data, and another round of Fed speak that suggests they will hold rates at higher levels. This latest round of data confirms the Fed’s messaging that more rate hikes are coming. The Fed’s George said she has raised her forecast on rates and favors rates above 5% and staying there for some time.
The bond market still expects rate cuts at the end of the year but wage pressures may eventually force them to push back those rate cut calls until next year.
Amazon
Corporate America is seeing a lot of bad news which is confirming fears that a tech selloff is here for a while longer. Amazon’s record layoff announcement was much larger than what the street was thinking. The playbook this quarter for big-tech is cost-saving plans that will ensure long-term success. The reduction of over 18,000 jobs was higher than the eyed 10,000 positions that was expected.
Amazon has posted robust hiring numbers since 2015, which has taken the total workforce to over 1.5 million people. Amazon may not be done with cost reduction efforts so a bottom might not yet fully be put in place.
US data
The ADP private payrolls report and weekly jobless claims reminded traders that the labor market is nowhere near cooling. Private payrolls rose 235,000 in December, much better than the 153,000 consensus estimate. The economy is clearly weakening, but the labor market refuses to break. It should start to weaken and we will probably start seeing jobless claims climb much higher starting next week. This week’s jobless claims printed at 204,000, well below the economists’ consensus range of 210,000 and 238,000. The Challenger report also showed job cut announcements fell by 43% in December.
The labor market will show signs of weakening going forward now that corporate America appears to be steadily announcing layoffs and cost-saving measures. For now, the Fed needs to stick to the script and say rates will stay higher for longer.
Crypto
Bitcoin is little changed despite a risk-off session on Wall Street. The Fed might need to do more hiking and that doesn’t seem to be sending crypto lower. Also in crypto news is the plunge with Silvergate Capital shares. The bank was forced to liquidate assets at a loss to cover $8.1 billion in withdrawals.
Reportedly, Crypto lender Genesis will have another round of layoffs that will reduce its workforce by 30%.
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With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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