MARKETS TODAY Dec 2 (Vica Partners) – The U.S. indexes were mostly flat Friday following the stronger-than-expected growth in jobs and wages data. The probability of a 75-basis point hike at the Fed’s December meeting rose today to 30.1% vs. the 21.8% yesterday, keeping pressure on the Fed to further tighten monetary policy.
The Dow Jones Industrial Average gained 35 points. The S&P 500 declined 0.12%, and the Nasdaq declined 0.18%.
Key Market Statistics
- Dow was up and the S&P 500 and Nasdaq declined today
- 10-year Treasury yield down at 3.486%, the 2 year Treasury yield up at 4.287%
- S. Dollar Index (DXY) down at $104.56, declining 0.16%
- Bitcoin rose to $17,041, up 0.36%
- Oil prices remain volatile with Brent crude $85.82, declining 1.22%, and US West Texas Intermediate at $80.21, declining 1.26%
Despite tighter monetary policy from the Fed, the labor market remains tight
Nonfarm Payrolls in the US rose by 263,000 in November, the data published by the US Bureau of Labor Statistics revealed on Friday. This reading came in higher than the market expectation of 200,000. Job gains came from leisure and hospitality, health care, and government sectors. Retail trade and transportation and warehousing showed declines.
Average hourly earnings rose 2x as much as forecast after an upward revision to the prior month as the pace of pay raises is inconsistent with the Fed’s 2% inflation target.
The jobs report showed average hourly earnings rose 0.6% to $32.82 in November the biggest gain since January, and were up 5.1% from a year earlier and exceeding the consensus of 0.3%. Wages for production and nonsupervisory workers climbed 0.7% from the prior month, the most in almost a year.
Other: the Unemployment Rate remained unchanged at 3.7% and the Labor Force Participation Rate reported slightly lower to 62.1% from 62.2%.
The S&P 500 still finished today at 4,072 which is above its 200-day moving average
The S&P 500 finished today again above its 200-day moving average. The line has been a resistance level for the index, most notably in April, August and November. Since the late September lows the index is now up about 13.4%.
Vica Momentum Stock Report
Select Energy Services NYSE (WTTR) (Grade B+) 50 Day Average +15.46, 100 Day Average +28.39%, 200 Day Average +7.81, YTD +30.66%
Select Energy Services, Inc. is a provider of water solutions to the U.S. unconventional oil and gas industry. It offers drilling and completion activities associated with hydraulic fracturing as well as complementary water-related services which support oil and gas well completion and production activities.
IMPORTANT TO READ; Low interest rates will return!
The Federal Reserve gave guidance that back in August of 2022 that they would raise rates to 4% and have. Rate adjustments have begun to drive down inflation and slow the pace of the economy.
Company earnings will remain mixed with stronger support for Communication services, Consumer staples, Energy, Financials and Health care. As these sectors tend to perform well during recessions
In 2023 we expect the Central Bank to initially raise rates and then by early Q3 of 2023 ease rate to avoid a deep recession. Vica analyst’s see a significant policy change coming in late 2023 with Powell reversing direction.
Energy is the Top Performing Sector in the S&P 500 Year to Date and will continue through 2023
Yearly commodity prices will continue to rise “as there are still production shortages” which include: iron, copper and crude oil – upside should continue.
Our analysts forecast global energy consumption will grow by about 1.9% in 2023 even with a slowing economy and rising energy prices. Strained gas supplies, averse weather and wars will force many countries to rely further on fossil fuels.
Energy outlook for 2023: Of the total U.S. fossil fuel production in 2021, dry natural gas accounted for 46%, the largest share. Crude oil accounted for 30%, coal for 15%, and natural gas plant liquids (NGPLs) for 9%. We expect those shares to slightly increase through 2023.
We see continued upside for investors in the fossil fuel sector, as it will significantly outpace the S&P 500 Index over the next 18 months.
Solid strategy for these type of market days include…
- Investing in companies that have solid balance sheets and offer dividends.
- Look to Communication services, Consumer staples, Energy, Financials and Health care as these sectors tend to perform well during recessions.
- When buying value and growth DON’T try to time market lows as its best to cost average buy companies that have solid profits.
- Try to resist most all tech and growth stocks where companies have negative margins.
*** Continue to watch for our daily momentum company recommendations as they are built by on our industry leading data base
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in the S&P 500 Year to Date and will continue through 2023
*** Banks will profit from higher interest rates on new loans and other products which will offset defaults
