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The S&P 500 is roughly flat at writing even after the U.S. Bureau of Labour Statistics reported a steep decline in job openings for October.
Labour market seems to be loosening up
That metric stood at 8.73 million last month – down 6.6% and well below 9.4 million that economists had forecast.
Note that the number of monthly job openings has not visited such a low level since March 2021. What it suggests is that the labour market is starting to loosen up. Still, Chris Senyek – the Chief Investment Strategist of Wolfe Research sees weakness ahead for the S&P 500.
Senyek is dovish primarily because the market is “pricing in an immaculate everything scenario” including a soft landing and 150 basis points of rate cuts in 2024.
Historically, the stock market collapses after the first Fed rate cut.
— Michael Burry Stock Tracker ♟ (@burrytracker) December 3, 2023
The market is predicting the first rate cut will be happening in the middle of 2024. pic.twitter.com/hQUV6hEg9a
The benchmark index is currently up 13% versus late October.
S&P 500 could pull back to the 4,250 level
A sharp decline in job openings saw vacancies to available workers ratio down to 1.3:1 in October – versus 2:1 just a few months ago.
But the return of risk appetite to the norm will be a headwind for the U.S. stocks in the coming year, said Chris Senyek in a research note on Tuesday.
We see disappointments ahead as a reversal of last year’s wealth effect, the lagged impact of past rate hikes, and a broad-based tightening of financial conditions sparks a modest recession.
All in all, the Wolfe Research expert warns of a pullback in S&P 500 to the 4,250 level which suggests about an 8.0% downside from here. Earlier this week, JPMorgan also said the benchmark index could revisit the 3,500 level (read more).
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