Employers created 223,000 jobs in December, which is higher than the Bloomberg consensus of 203,000, but still well below the 263,000 jobs added in November. However, the unemployment rate fell to 3.5 percent, which highlights the resilience of the job market.

But what cheered up markets was that average hourly earnings for all employees on private nonfarm payrolls rose by 0.3 percent, which is slightly below expectations and shows that there is less inflationary pressure on wages.

The slowdown in job creation is a sign that the Fed's efforts to curb inflation is affecting the labor market.

As is often the case at the beginning of the year, stock market indexes show somewhat erratic movements. They retreated yesterday after having jumped on Wednesday. The S&P 500, the Dow Jones and the Nasdaq 100 lost more than 1%. Investors are still trying to guess how much and when the US central bank will reverse its strategy of raising key rates. And it is clear that they are having a hard time agreeing.

It must be said that the Fed regularly sends contradictory signals. Maybe they are doing it on purpose after all, or they have no idea when they will be able to release the pressure. Or both.

In any case, the US markets are still cautious and hypersensitive to every macroeconomic statistic that matters. Today's fresh employment figures for December saw all three indexes go from flat to almost +1%, and then then retreated at the open. Yesterday, another job report, the ADP National Employment report, showed that private employment rose more than expected in December, by 235,000 jobs versus 150,000 jobs expected in a Reuters consensus of economists, signaling that the economy is resilient enough to support more rate hikes. U.S. stock index futures fell sharply after the publication.

Market movements can be erratic and this reminds me of an interesting column published this week by Joachim Klement, a market economist from Liberum whom I quote regularly in these columns. In it, he explains that most of the knowledge he accumulated during his financial studies is of little use to him in real life and that he generally bases his comments on empirical observations. He points out that investing and economics are social systems that involve billions of people interacting, each with different information, incentives, biases and moods. What does this mean? That there are systematic second, third and fourth round effects, which are inherently difficult to guess. So, the unexpected is the norm and one must know how to regularly question one's convictions by observing reality. This could be a good resolution for 2023!

 

Economic highlights of the day:

Today, Eurostat published the first estimate of December inflation in the euro zone. In the US, monthly employment data, the ISM services index and factory orders are on the agenda. All the agenda here.

The dollar is unchanged at EUR 0.9505 and GBP 0.8399. The ounce of gold is back up to 1846 dollars. Oil is gaining some ground, with North Sea Brent crude at USD 79.92 per barrel and US WTI light crude at USD 75.10. The yield on 10-year US debt is holding steady at 3.72%. Bitcoin is trading around 16,800 dollars.

 

In corporate news:

* Tesla on Friday cut the selling price of its cars in China for the second time in less than three months due to increased competition in a struggling Chinese car market. The U.S. automaker's prices are now 24 percent below their September level, according to Reuters calculations. The stock is down 5.4 percent to $10.37 in premarket trading.

* Southwest Airlines pledged on Thursday to launch a thorough review of its operations after the airline cancelled thousands of flights last month. The incident could result in a revenue shortfall of up to $1 billion, according to a union official, while intermediary Raymond James estimates it could cut projected fourth-quarter revenue growth by more than half. The stock is down 1% in pre-market trading.

* Pfizer said Thursday it is considering a focus on "high-impact" drugs and vaccines, including early-stage treatments for rare diseases and cancer.

* Moderna announced Thursday a $35 million licensing agreement with cancer specialist Cytomx Therapeutics to develop messenger RNA-based treatments for a wide range of diseases.

* Bed Bath & Beyond is preparing to file for bankruptcy protection in the coming weeks, sources close to the matter said. The stock is down 11.2% in pre-market trading.

* Boeing, Northrop Grumman - Bernstein said Friday it expects 2023 to be a "strong" year for aerospace and defense companies worldwide, due in part to the reopening of the Chinese economy.

 

Analyst recommendations:

  • Bank of America: Deutsche Bank downgrades to hold from buy. PT up 5.7% to $36.
  • Diageo: Morgan Stanley moves from Overweight to Equal-Weight with a target of GBp 3900.
  • EastGroup: Baird analyst upgrades to outperform from neutral. PT up 17% to $170.
  • EasyJet: Goldman Sachs downgrades from Buy to Neutral targeting GBp 450.
  • Fair Isaac: Deutsche Bank reinstated coverage with a recommendation of buy. PT up 17% to $697.
  • Getty Realty: Baird downgrades to neutral from outperform. PT down 1.2% to $34.
  • JPMorgan: Deutsche Bank downgrades to hold from buy. PT up 7.1% to $145.
  • Lincoln National: J.P. Morgan downgrades to neutral from overweight. PT up 16% to $36.
  • Lockheed Martin: Vertical Research Partners downgrades to hold from buy. PT up 2.9% to $491.
  • Next: Panmure Gordon & Co upgrades to buy from hold. PT up 8.2% to 7,050 pence.
  • OneMain: Barclays downgrades to equal-weight from overweight. PT up 13% to $39.
  • Pagegroup: Exane BNP Paribas starts tracking at neutral, targeting GBp 505.
  • PNC Financial: Deutsche Bank upgrades to buy from hold. PT up 19% to $190.
  • Radian: Barclays downgrades to equal-weight from overweight. PT up 11% to $21.
  • Regency Centers: Baird upgrades to outperform from neutral. PT up 14% to $71.
  • Robert Walters: Exane BNP Paribas starts tracking at Outperform, targeting GBp 800.
  • RPM International: Wells Fargo Securities lowers PT to $92 from $100. Maintains equal-weight rating.
  • Standard Chartered: Jefferies remains Buy with a price target reduced from GBp 991 to GBp 950.
  • Tesla: CICC initiated coverage with a recommendation of outperform. PT up 45% to $160.
  • Truist Financial: Deutsche Bank downgrades to hold from buy. PT up 8% to $48.
  • Voya Financial: J.P. Morgan upgrades to overweight from neutral. PT up 22% to $77.