Key events that could impact trading: Monday’s 5 things to know
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Here are the key events taking place on Monday that could impact trading.
ECONOMIC REPORTS: Monday morning will mark the release of two economic reports on the services sector and factory orders.
At 10 a.m. ET, the Institute for Supply Management releases its non-manufacturing PMI for November.
This key gauge of services sector activity is expected to slip for the third month in a row to 53.1, down slightly from 54.4 in October and the lowest since May 2020.
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Robotic arms assembly body components of a Rivian R1T electric vehicle (EV) pickup truck at the company’s manufacturing facility in Normal, Illinois. (Jamie Kelter Davis/Bloomberg / Getty Images)
The index has trended lower since hitting a record-high 68.4 last November (50 is the dividing line between an expanding and contracting services sector).
The key numbers to watch include the ISM non-manufacturing PMI, with investors eager to find out if the latest weakness in the manufacturing side of the economy, which fell into contraction in November for the first time in two-and-a-half years, is mirrored in the services sector.
There is no estimate for the prices-paid component, but in October it rose for the first time in six months to 70.7, bouncing off the lowest level since January 2021.
At the same time, the Commerce Department is expected to say factory orders bounced 0.7% in October, above September’s 0.3% rise.
STOCKS RECAP: U.S. stocks wobbled around the flatline Friday, retracing early losses after a stronger-than-expected jobs report cast doubt on how quickly the Federal Reserve will be able to slow down its pace of interest-rate increases.
Stocks dropped and Treasury yields jumped early Friday on what seemed like a surprisingly strong jobs report. But investors picked up on some mixed signals in the report as they digested it, such as a decline in the average workweek for private-sector employees.
By Friday afternoon, the S&P 500 fell 4.87 points, or 0.1%, to 4071.70, after dropping more than 1% earlier in the day. The Dow Jones Industrial Average rose 34.87 points, or 0.1 %, to 34429.88 and the Nasdaq Composite fell 20.95 points, or 0.2%, to 11461.50.
Normally, strong economic data should be good news for investors. But this year, money managers have seen a tight labor market as proof that the Fed will have to keep raising rates to slow down the economy. That, in turn, has weighed on markets.
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Traders work on the floor at the New York Stock Exchange in New York, Wednesday, Nov. 2, 2022. (AP Photo/Seth Wenig / AP Images)
"The adverse reaction to the nonfarm payroll numbers sits in that counterintuitive world of good news is bad news as it pertains to what the Fed might have to do," said Art Hogan, chief market strategist at B Riley Wealth Management. "To me, that's always a mistake and likely will alleviate next week."
Hogan said he believes the Fed is unwilling to "crush" the labor market and that Friday's jobs number was in line with previous months and unlikely to have a huge impact on the central bank's decision-making.
Stocks began the week lower amid widespread protests in China. They rebounded strongly on Wednesday thanks to a speech from Federal Reserve Chairman Jerome Powell, who said the central bank is on track to lower the pace of interest-rate increases starting this month.
Still, Powell also said that the labor market needed to cool more for the Fed to be confident that inflation will decline toward its target rate.
"Basically, everything is hinging on what the Fed may or may not do. And this is the next big piece in that puzzle," said Fahad Kamal, chief investment officer at Kleinwort Hambros.
Friday's report had plenty of concerning data for investors looking for it.
Average hourly earnings jumped 0.6% for the month, a sign that wage pressure isn't easing. And the labor-force participation rate ticked down to 62.1%, which could lead to even higher competition for workers.
"The surprisingly high increase in hourly earnings may spook investors bracing for the Fed to react with another aggressive rate increase," Bryce Doty, senior portfolio manager at Sit Investment Associates, wrote in a note Friday.
MUSK GETS POLITICAL: Twitter CEO Elon Musk turned to the social media platform he owns on Sunday night to say the U.S. Constitution was greater than any president.
Musk’s tweet was in response to a story on FoxNews.com published earlier in the day, about President Biden’s administration saying President Donald Trump deserved to be "universally condemned" for saying parts of the U.S. Constitution should be terminated.
Trump’s comments were made last week in response to the release of the "Twitter Files" on Friday.
He argued the files showed evidence of "fraud and deception" in the 2020 election and eliminating parts of the constitution would address it.
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Tesla CEO Elon Musk and former President Donald Trump. (FOX Business / Fox News)
"So, with the revelation of MASSIVE & WIDESPREAD FRAUD & DECEPTION in working closely with Big Tech Companies, the DNC, & the Democrat Party, do you throw the Presidential Election Results of 2020 OUT and declare the RIGHTFUL WINNER, or do you have a NEW ELECTION?" Trump said on social media.
"A Massive Fraud of this type and magnitude allows for the termination of all rules, regulations, and articles, even those found in the Constitution," he continued. "Our great 'Founders' did not want, and would not condone, False & Fraudulent Elections!"
The White House responded to Trump, saying The Constitution is a "sacrosanct document" that has guaranteed that freedom and the rule of law has prevailed for the past 200 years.
"The Constitution is greater than any President," he said. "End of story."
ELECTRIC CAR CRISIS?: Switzerland could ban electric vehicles from being used non-essentially this winter as government officials begin to brace for an energy crisis during the winter months, according to reports.
The Telegraph reported on Saturday that Swiss officials have drafted emergency proposals that restrict power usage if things get bad this winter
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Tesla Model X electric cars recharge their batteries in Berlin, Germany, November 13, 2019. (REUTERS/Fabrizio Bensch/File Photo / Reuters Photos)
Other bans, according to the Telegraph, may include concerts, theater performances and sporting events, all to prevent a blackout.
The reason Switzerland is preparing for possible blackouts is that the country relies on imported energy during the summer months. While more than half, or 60 percent of the country’s energy comes from hydropowered means, but in the winter months productions slows and the country relies on imports.
The war in Ukraine has contributed to shortages in imports across all of Europe, but paired with Switzerland’s dependency on hydropower, the country is, as the Telegraph put it, "vulnerable to energy shortages."
The country’s emergency plan is split into two tiers: crisis and emergency. It also has three levels of restrictions in the first tier and two levels of restriction in the third tier.
Swiss officials will activate each tier and level based on suppl level. At the very minimum, buildings will only be able to be heated to 20 degrees Celsius. As things intensify, electric vehicles will be limited to essential trips, and in the worst-case scenario, concerts and sporting events will cease.
COMPANIES REASSESS CHINA: U.S. demand in China's manufacturing industry has reportedly dropped sharply as the country continues to grapple with COVID-19 lockdowns.
Some U.S. companies have signaled plans to shift away from China. Apple is planning to pivot some production elsewhere in Asia, such as India and Vietnam, the Wall Street Journal reported on Saturday.
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A worker on the assembly line at the Shanghai Sany Heavy Machinery Co. facility in the Lingang Special Area and Comprehensive Zone in Shanghai, China. (Qilai Shen/Bloomberg via Getty Images / Getty Images)
China's manufacturing purchasing managers' index, which measures the performance of the country's manufacturing industry, came in at 48.0 in November, the lowest reading in seven months, according to the country's National Bureau of Statistics.
Meanwhile, China's non-manufacturing PMI, which reflects business sentiment in the country's service and construction industry, dropped from 48.7 in October to 46.7 in November.
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China has stuck by its zero-COVID policy amid a rise in COVID-19 cases in recent weeks.
