Strong job figures raise NFP expectations; Apple to open sharply lower

Summary:

• ADP employment change: +271k vs 179k exp

• Big beat may raise expectations for tomorrow’s NFP report

• Apple warning to cause gap lower; weighs on US indices

On the economic data front by far and away the biggest event for the first week of 2019 is the US non-farm payroll report, which is scheduled to be released tomorrow afternoon at 1:30PM. Expectations for the event will have likely been ramped up further this afternoon as the ADP employment change for December smashed forecasts in coming in at 271k against median expectations of 179k. This metric is widely seen as a precursor to Friday’s main event and even though the last month’s reading was revised lower by 22k to 157k there is little doubting the strength of today’s data.  

Historically there’s been a pretty good correlation between the ADP employment change and NFPs and therefore today’s strong reading could be seen to raise expectations for tomorrow’s number. Source: XTB Macrobond

Not long after the ADP release the weekly initial jobless claims came in higher than expected, with the latest print of 231k vs 220k forecast. The prior was also revised higher to 221k from 216k previously. This indicator rose to its highest level in 4 weeks but is normally given less attention than the ADP and while it may take the shine off the overall outlook a little it doesn’t fundamentally alter the notion that the labour market is in rude health.  

Looking at the breakdown of jobs, the bulk of them came in the service producing sector with 224k added and 47k coming from the goods producing sector. Source: XTB Macrobond

On this afternoon’s opening bell all eyes will be on Apple, with the tech stock plunging in after hours trade after it cut its sales forecasts. The unexpected disclosure showed anticipated revenue of around $84B for the 3 months to 29 December, significantly below the $89B forecast made in November which had already disappointed investors. The stock is called to open lower more than 8% at present with pre-market showing the stock in the region just below the 145 handle. Should the stock open around these levels it will represent a decline of just less than 40% from it’s record peak back in early October in what has no doubt been a stunning decline.

Apple is expected to open this afternoon close to its lowest level in 18 months with the stock dropping sharply since making a record peak of 233.5 back in early October. The market is below the 200 day SMA, which is potentially rolling over and if price drops below 142 then it opens up scope for larger declines ahead. Source: xStation