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Pre-Markets Stay Negative Ahead of JOLTS Report

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Here in this first full week of December, we’re beginning to see something of a re-think in the markets following a robust November that brought new year-to-date highs everywhere but the small-cap Russell 2000 index. While Friday, December 1st was a strong continuation of bullish sentiment, yesterday pitched a downward shift during the morning trading hours before fighting back somewhat; this morning we may be testing those lows.

Most of the impactful data this week is still ahead of us, finishing with a flourish on Friday with the Employment Situation report from the Bureau of Labor Statistics (BLS) and the Household Survey. Today marks the start of so-called “Jobs Week,” with Job Openings and Labor Turnover Survey (JOLTS) for October out at 10 am ET. In between, we’ll see private-sector payrolls from ADP (ADP - Free Report) tomorrow and Weekly Jobless Claims Thursday. Presumably, we’re still in “bad news is good news” territory: weak jobs numbers will keep investors confident that the Fed will make no moves higher on interest rates.

Then again, this has already been priced into equities, or at least mostly. For many forward-looking market participants, the name of the game is Fed cuts to current rates, with some believing the Fed funds rate will come down as early as the first three months of the year. More still believe mid-year will be the right time to see cuts, while some analysts — who keep the inflation mismanagement of the 1970s and 80s in mind — think no earlier than September will bring any rate cuts.

Other than the JOLTS numbers later this morning, we’ll also take a look at S&P Services PMI for November (expected to stay even at the tepid growth level of 50.8) and ISM Services (expected to gain 60 basis points [bps] to 52.4% last month). Levels above 50 indicate growth for both of these reports; we do not expect numbers below this level on either — but if we get them, the odds of a recession in 2024 will suddenly, if not acutely, increase.

Ahead of today’s open, we see fiscal Q1 earnings results for AutoZone (AZO - Free Report) come in better than expected: earnings of $32.55 per share easily surpassed the $31.01 expected, and the $27.45 per share reported in the year-ago quarter. Revenues of $4.2 billion also slid past the $4.17 billion in the Zacks consensus, for a year-over-year gain of +5.1%. The company also continued its aggressive buyback initiatives, repurchasing $1.5 billion in shares over the quarter.

After today’s close, we’ll hear from luxury homebuilder Toll Brothers (TOL - Free Report) , which is expected to post lower numbers year-over-year on both top and bottom lines: -21.6% and -25.1%, respectively. Obviously, higher interest rates through most of this year have taken a “toll” on all homebuilders, although due to existing homeowners keeping their domiciles off the market, we have seen homebuilders picking up the slack. The company has beaten earnings estimates in each of the past four quarters, for an average beat of more than +30%.

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