LIVE MARKETS Thanks for nothing, Omicron: Private sector jobs sink for first time in 21 months

 LIVE MARKETS Thanks for nothing, Omicron: Private sector jobs sink for first time in 21 months


  • S&P 500, Nasdaq green; Dow slips; outperform chips
  • Comm svcs lead S&P sector gainers; energy down most
  • Euro STOXX 600 index up ~ 0.6%
  • Gold gains; dollar, crude, bitcoin dip
  • US 10-Year Treasury yield edges down to ~ 1.77%

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THANKS FOR NOTHING, OMICRON: PRIVATE SECTOR JOBS SINK FOR FIRST TIME IN 21 MONTHS (1013 EST / 1513 GMT)

Data released on Wednesday provided stark evidence that Omicron infected the labor market in the first month of 2022.

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According to payrolls processor ADP, private employers unexpectedly shed 301,000 jobs in January, marking the first monthly headcount decrease since April 2020, when abrupt shutdowns to contain the pandemic caused 22 million + jobs to evaporate overnight. read more

The number widely missed the 207,000 gain analysts expected, with spiking infections of the COVID-19 Omicron variant the likeliest disrupter.

“Omicron effects will likely distort the January BLS data given a high number of infections caused by widespread disruptions,” writes Rubeela Farooqi, chief US economist at High Frequency Economics. “Depending on the magnitude, the Fed is likely to look through any weakness given virus-related disruptions are viewed as temporary.”

“Even so, coming months bear data watching for any changes in underlying conditions in the labor market,” Farooqi adds.

It’s worth noting that ADP’s National Employment data (USADP = ECI) is not a reliable predictor of the Labor Department’s more comprehensive jobs report. Still, it doesn’t bode well for Friday’s numbers, which economists, on average, anticipate will show 150,000 private sector job adds.

But the estimates range widely, from -150,000 to +310,000.

The graphic below shows how closely (or not) the ADP data tracks Labor Department private payrolls:

ADP

Meanwhile, mortgage demand saw a 12% upward bounce last week, even as interest rates continued their upward climb, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate (USMG = ECI) inched 6 basis points higher to 3.37%. But applications for loans to purchase homes (USMGPI = ECI) and refinance existing mortgages (USMGR = ECI) both rose, by 4% and 18%, respectively.

Are hopeful borrowers looking to hop on the low-rate ship before it finally sails?

Nancy Vanden Houten, lead US economist at Oxford Economics, believes they might be.

Noting that mortgage rates have gained 60 basis points since early November, Houten says “perhaps borrowers are seeking to obtain mortgages before rates move higher, although the MBA said application counts have recently been volatile due to holidays.”

The affordability ship has already left the harbor for many potential homebuyers, particularly at the lower end of the market.

Along with climbing rates, pandemic-driven demand have sharply depleted inventories of homes on the market, launching home prices to the moon.

Even with today’s bump, overall mortgage demand is down 37% from the same week a year ago:

MBA

(Stephen Culp)

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NASDAQ COMPOSITE: LIFTOFF FROM A LAUNCHING PAD? (0900 EST / 1400 GMT)

From its November record high to its January low the Nasdaq Composite (.IXIC) was smashed. read more With this, one measure of internal strength may have reached washed-out levels, and may now be signaling potential for a surprisingly large recovery.

The Composite collapsed nearly 17% on a closing basis from its November 19 peak to its January 27 low.

Meanwhile, the Nasdaq New High / New Low (NH / NL) index, which had been diverging for eight months into the IXIC’s November high, fell to 6% on January 28 read more:

IXICNHNL02022022

Now, with the Composite’s rolling three-day jump of more than 7%, its largest such rally since November 2020, the NH / NL index has risen to 9.1%. read more

Of note, last week’s 6% -NH / NL index reading, and subsequent turn higher, sets up the potential for it to be the seventh-lowest trough in the midst of a major IXIC decline since late-November 2008.

Admittedly, the average of the six major troughs from late-2008 to early-2020 is 1.7%, so deeper than last Friday’s low. Still, 6% is historically depressed, and may therefore be sufficiently washed out. read more

From the prior six major NH / NL index troughs, the average reaction saw the measure rise to a reading of 71% before a more significant setback occurred. With this, the Composite, on average, advanced 22% from the date of the NH / NL index trough to the reaction high.

Major indexes still have important chart hurdles to overcome read more, and this analysis is based on averages, but if the 6% -NH / NL index trough holds, and it sees an average thrust into a high reaction, accompanied by an average Nasdaq advance , the surprise would be new record highs for the Composite.

(Terence Gabriel)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

Our Standards: The Thomson Reuters Trust Principles.



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