Pre-Markets Up Ahead of a New Jobs Week

Monday, January 6, 2025

In this first full trading week of the new year, pre-market futures are up again this morning, after a Friday trading session that saw both the Dow and the Nasdaq raise by more than +300 points each. At this hour, the Dow is up an additional +185 points, the Nasdaq +220 and the S&P 500 +45.

The trading lows for the month were from the first trading day of 2025, on Thursday. Perhaps we’re seeing a bit more hopeful sentiment as we are now two weeks from a new Trump administration taking over the White House. Deregulation, pro-cypto ideology and a potential tax cut for high earners are all seen as positive elements for a continued robust market.

That said, we’ve now seen the S&P 500 up more than +20% two straight years. The last time we’d seen a string that long (or longer) was nearly 30 years ago, during the Internet boom of the late ’90s (1995-98). The S&P in 1999 was up another +19.5%. Of course, everything that comes up must come down eventually. Right now, market participants are hopeful for another strong run in 2025.

After the opening bell, we’ll see two economic metrics hitting the tape. Neither is expected to haver the impact of, say, Friday morning’s Employment Situation report, but analysts will look to see if current narratives hold or are tacking differently at this stage.

S&P final Services PMI for December is expected later this morning. A month ago, this report jumped to highs not seen since October 2021, to 58.5. This is strongly above the 50-line, which determines growth from contraction. The Services sector, even with overall employment looking a tad suspect in recent months, continues to power ahead.

Factory Orders for November — quite a different view of the U.S. economy from Services PMI — are expected to soften to -0.3% in the report issued later this morning, from +0.2% gain from the previous month. Currently, we’re seeing what many other economic prints have pointed us toward: that manufacturing in this country continues its recessionary traits (although the Chips Act, if allowed to go unmolested by the incoming Congress, ought to cure at least a portion of this) while services exhibit strength.

Tuesday kicks off the beginning of a fresh Jobs Week, with the November Job Openings and Labor Turnover Survey (JOLTS) report out after tomorrow’s opening bell. This will be followed by private-sector payrolls for December from ADP ADP on Wednesday ahead of the bell. Normal Weekly Jobless Claims numbers come out Thursday during pre-market activity, and Friday morning’s non-farm payrolls and household survey are the week’s key feature.

Those numbers, known together as the Employment Report, are expected to see +155K new jobs filled last month, down from the +227K seen for November but roughly in-line with the trailing four-month average. These last four months, however, have been abnormally volatile: +227K in November, +36K in October, +255K September and +78K in August. Seasonality (holiday-season temporary hires) should keep December payrolls from dipping too low, but let’s wait and see what happens.

Keep in mind the Fed’s dual mandate: not just curbing inflation but also fostering full employment. If we see a continued erosion of labor force hires — and consequently a rise in the Unemployment Rate — the Fed may opt to increase the number of interest rate cuts it makes over the course of the year. 

Gone are the days of the +3.4% Unemployment Rate we saw back in April of 2023, and +5% is more or less the historical norm, so we’d have to see a fairly drastic change to the labor market for the3 Fed to give a full re-think, but it’s worth paying attention to.

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