Market 01/30: Labor report increases concerns Fed will keep rates at peak

Labor report: Job openings surge - paving the way for Fed to keep rates high

December job openings unexpectedly increase by +101,000 to over 9 million open jobs.

On average, 1.44 open jobs for each unemployed person.

→ Sign that the labor market remains strong.

Number of quits continuously decreasing in recent months, down to the lowest in 3 years to 3.392 million.

→ Workers less confident about ability to find new job opportunities/higher pay.

Hiring numbers recover slightly but still low at Covid levels.

With the labor market still too optimistic: high chance Fed will maintain high rates long-term due to no pressure from the labor market.

Related articles: FED's plan …: inflation, moral hazard and Sahm Rule

=> 2-year Treasury yield surges unexpectedly right after labor report - as market reduces expectations for first rate cut.

Market continues to reduce expectations for Fed rate cut in March to just 39% in March, after labor report (from 46% previously).

Update on recent layoff announcements in the labor market

Although the number of open jobs increased, the number of layoff announcements from large companies is also increasing:

Twitch: 35% workforce
Hasbro: 20% workforce
Spotify: 17% lworkforce
Levi's: 15% workforce
Zerox: 15% workforce
Qualtrics: 14% workforce
Wayfair: 13% workforce
Duolingo: 10% workforce
Washington Post: 10% workforce
eBay: 9% workforce
Business Insider : 8% workforce
Charles Schwab: 6% workforce
Macy's: 4% workforce
Blackrock: 3% workforce
Citigroup: 20,000 employees
UPS: 12,000 employees
Pixar: 1,300 employees
Salesforce: 700 employees
American Airlines: 650 employees

Consumer confidence rises to highest since late 2021

Consumer confidence index surges in January: 114.8 (> previous month: revised down 108).

Present situation index: 161.3 - highest since start of Covid (previous month: 148.5).
Expectations: 83.8 (> previous month: 85.6).

→ Signals of slowing inflation, expectations of rate cuts.

December was the 3rd consecutive month this index was revised down.

Confidence in employment also rises : The number of survey participants who believe it's easier to find jobs also increases.

→ Favorable employment conditions as companies continue to retain workers and increase job postings (closely related to the labor report above).

Inflation confidence: inflation expectations at average level 5.2% in the next 12 months - the lowest since March 2020.

Home prices growth slows after interest rate effect

National home price index growth slows due to high interest rates

According to FHFA data, the national home price index rises +0.3% MoM - the 12th consecutive monthly increase.

Mortgage rates reach peak 7.79% in October + supply shortage has caused difficulties for buyers (although rates have cooled since then).

Home prices in 20 largest cities rise for 10 consecutive months

Case-Shiller home price index for 20 largest cities rises continuously for 10 months, reaching +0.15% MoM versus +0.5% expected.

This is the smallest monthly increase since January 2023.

6 cities record peak prices in November: Miami, Tampa, Atlanta, Charlotte, New York and Cleveland.
Home prices in Detroit record the highest increase.

IMF raises global economic outlook

Forecast world economy to grow 3.1% in 2024 (> 2.9% forecast in October).

IMF keeps 2025 forecast at 3.2%.

Forecast inflation decline to continue to 2025: bringing global inflation down from 6.8% to 4.4%.

Expected inflation in developed countries to fall faster than in emerging markets.

Earnings reports: Pfizer, JetBlue, UPS

Pfizer ER: Covid business activity declines less than expected

EPS: 10 cents versus expected loss of 22 cents.
Revenue: down 41% YoY, reaching 14.25 billion USD, lower than expected 14.42 billion USD due to declining sales of Covid products.
- Revenue from Covid vaccine and Paxlovid reached 12.5 billion USD in 2023, down 78% from the peak of 57 billion USD in 2022.

Expected 2024 revenue to reach 58.5 - 61.5 billion USD, including 8 billion USD revenue from Covid products and the acquisition of cancer drug developer Seagen.

EPS ranging 2.05 - 2.25 USD.

JetBlue ER: Expected deeper cuts as costs rise and revenue falls

Revenue: down 3.7% YoY, reaching 2.33 billion USD in Q4.
EPS: 0.19 USD vs 0.22 USD last year.
Average fuel cost per gallon higher than expected: 3.08 USD vs 3.07 USD.
Profit per passenger per mile down: reaching 15.89 cents (due to uneven travel demand

Expected Q1/2024 revenue to decline 5 - 9%. Full-year revenue expected unchanged from last year.

→ JetBlue shares fell about 5% in morning trading.

UPS ER: Cutting 12,000 jobs due to disappointing 2024 revenue outlook

Adjusted EPS: 2.47 USD vs expected 2.46 USD.
Revenue: down 7.8% YoY to 24.92 billion USD, below expected 25.43 billion USD.
Company reported shipment volumes down both domestic (-7.4%) and international (-8.3%).
Expected to lay off 12,000 workers in 2024 → Saving about 1 billion USD in costs.

Expected 2024 revenue: ranging from 92 - 94.5 billion USD.

→ UPS shares dropped more than 7% at the open after disappointing earnings report.

Following the chain of layoff announcements from major companies (above), UPS also announced 12,000 job cuts after disappointing revenue report.

Other news:

Forecast Apple to reduce 2024 iPhone shipments containing key semiconductor components to around 200 million units (down -15% YoY)
→ Expected significant decline in shipments in 2024
Boeing: withdraws proposal requesting exemption from safety certification privileges for Boeing 737 MAX 7.
HSBC fined 57.4 million GBP for failing to accurately identify deposits eligible for the UK's Financial Services Compensation Scheme.
- Error amount up to 142 billion USD.
China: Offshore ETF trading surges due to attractiveness of foreign stocks, with inflows reaching 1.3 billion USD.
Dallas Fed Services Index falls to -9.3 from previous -8.8, indicating prolonged recession since June 2022.