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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.

The market is predicting the first rate cut will be happening in the middle of 2024. pic.twitter.com/hQUV6hEg9a

— Michael Burry Stock Tracker ♟ (@burrytracker) December 3, 2023

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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