Wall Street, Washington, DC Clown Shows

Are you not entertained?

The new year is only five days old. Thankfully, Wall Street, their stock market circus, has only been on display for two.

The three-ring affair that is the Dow Jones Industrial Average, S&P 500, and NASDAQ markets have gone up-and-down like horses on a carousel, ending up pretty near to where they began. In particular, Wednesday’s action was somewhat arousing, especially the final 13 minutes of trading, when the Dow shifted from a small loss to a somewhat sizeable gain, adding 183 points after 3:47 pm ET.

Whistling and cheering was heard behind the CNBC set of “Closing Bell.”

Two days in, the Dow is up 123 points, NASDAQ down 7.73, and the S&P has gained 13 points, not really taking a bite out of those 2022 losses. Overheard yesterday was the following: “When there’s no Santa Rally, there’s usually no January Effect.”

The commenter was of course referring to the lack of a meaningful rally the final two weeks of last year and the presumptive lack of any upside due to relief from tax-loss selling or Wall Street’s finest putting their bonus money to work.

Problem is, tax-loss selling is still selling and bonuses were pretty darn slim last year. Anybody with extra cash is probably allocating more of that loot to bolstering their pantries with rice, beans, canned goods and other non-perishable edibles rather than pursuing investment opportunities, those few that offer any hope still appearing fairly risky.

Eventually, there will be a rally, but the betting is that it won’t happen until stocks head a little further south and that it won’t be a big one because all of the elements which drove stocks lower in 2022 are still in play and might even cause further erosion on the indices.

Sluggish trading may have less to do with risk aversion than an appealing condition for profit-takers. After all, selling winners in January equates to not paying capital gains tax on them until April 2024, a full five quarters from now, giving investors plenty of time to make more money or more mistakes, depending on market gyrations.

Whatever are the present issues, there seems to be a high level of trepidation among the usual plungers, still smarting from last year’s spanking. There’s probably more than a few traders taking the wait-and-see approach, at least until December’s Non-farm Payroll report is issued Friday morning.

US employment is expected to have added 200,000 jobs in 2022's final month, though there are some indications that hiring (and spending) wasn't very strong during the crucial holiday shopping season. Brick-and-mortar retailers haven't had much to cheer about for the past few years. Plenty of companies were shutting down locations while few were expanding. Additionally, along with tech companies announcing layoffs recently - Amazon announced another round of layoffs, numbering 18,000, just yesterday - some financial firms also have recently announced job cutbacks.

The lineup is growing, with Salesforce one of the more recent entrants into the jobs cutting lottery. The company announced on Wednesday that it was cutting 10% of its workforce, or about 8,000 employees, and closing some offices. Venmo, part of PayPal, said it was shedding 11% of its staff, though no numbers were given. Goldman Sachs CEO Divid Solomon announced last week that mass layoffs were just weeks away, suggesting that the "Vampire Squid" may be losing a few tentacles prior to the next FOMC meeting (January 31 - February 1).

Thursday morning, The Challenger Report had this sobering message:

"U.S.-based employers announced 43,651 cuts in December, falling 43% from the 76,835 announced in November. It is up 129% from the 19,052 cuts announced in the same month in 2021, according to a report released Thursday from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc."

That's 120,486 layoffs announced in just the past two months, which doesn't jibe well with continuing job growth. The growing discrepancy between the BLS's own Establishment Survey and Household Survey is another major concern. While the Establishment Survey showed consistent job growth in 2022, the Household Survey has been essentially flat.

None of this is very positive going forward, so interested participants may continue to sit on their hands (and wallets) a while longer, despite whatever numbers are released Friday morning (8:30 am ET).

Meanwhile, the dysfunctional US federal government has gone full clown show over electing a Speaker of the House to succeed outgoing Nancy Pelosi. Kevin McCarthy's bid for Speaker has fallen on some deaf ears among Republicans. A group of about 20 representatives, including Chip Roy (TX) and Matt Gaetz (FL), refuse to vote for McCarthy, who recently said he's "earned" the right to be named Speaker.

Aside from McCarthy's annoying bluster, the House holdouts are seeking various changes to rules they say limit their effectiveness in crafting and passing legislation. Through six separate votes Tuesday and Wednesday, McCarthy has failed to garner the necessary 218 votes and has done little in the way of compromising to satify his detractors. The House is set to resume its version of Ringling Brothers at noon, Thursday, though little progress appears to have been made.

Names that have been floated as an alternative to California's McCarthy include Jim Jordan (OH) and Louisiana's Steve Scalise, who has served as both majority and minority whip the past ten years and will be majority leader once the Speakership is decided and legislators are sworn into office.

It's a fine show.

At the Close, Wednesday, January 4, 2023:

Dow: 33,269.77, +133.40 (+0.40%)

NASDAQ: 10,458.76, +71.78, +0.69%

S&P 500: 3,852.97, +28.83 (+0.75%)

NYSE Composite: 15,350.30, +195.85 (+1.29%)