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Jobs, unemployment, wages

It's the first Friday of the month, and that means the non-farm payrolls report. Economists expect the NFP release to show that 200,000 jobs were added in December, with the unemployment rate staying near a 50-year low at 3.7%. Wage growth will also be a focal point, indicating how much the tight labor market may be contributing to inflation. Consensus estimates see average hourly earnings rising 5.0% on a Y/Y basis vs. 5.1% in November, and that figure had risen from 4.7% Y/Y growth in October.

What the Fed is watching: Price pressures have shifted from the goods side of the economy to the services side of the economy, where costs remain elevated given the fact that the labor market remains strong. Companies are continuing to hire for many open roles, making it difficult for the central bank to temper demand and bring inflation under control. Julia Pollak, chief economist at ZipRecruiter, said the Fed is looking for 3.5%-4.0% wage growth to get the economy back to 2% inflation, and this month's number will help determine if November's wage growth increase was part of a trend or an aberration.

What investors are watching: Hopes of a soft landing may still be in the cards, but the longer the current dynamics play out, the greater likelihood the economy could tip into recession. According to Pollak, the Fed is "hoping to pull off an unusual feat" in reducing job openings without increasing the unemployment rate, as it continues to raise rates to bring supply and demand into balance. Optimistic investors are banking on that scenario as well, but more pessimistic ones have been busy hedging their bets and diversifying their portfolios.

What CEOs are watching: "If they think demand is weakening and revenues are going to slow, they're probably going to feel pressure to cut costs to maintain profitability," said James Knightley, chief international economist at ING. "That does suggest that the pace of employment growth is likely to slow quite quickly through this year." (17 comments)

#ChatGPT

OpenAI, the developer behind artificial intelligence bot ChatGPT, is in discussions to raise capital at a valuation of $29B, according to multiple sources. Venture capitalists are rushing in to profit from the viral technology, including firms like Thrive Capital and Peter Thiel's Founders Fund. The transaction is being structured as a tender offer, where investors buy shares from existing holders, and would be double the $14B valuation the company received in 2021.

Snapshot: The deal is making waves in Silicon Valley, where many startups have prepared or seen big cuts to their valuations as investors pull back from new deals. The tender offer comes just a month after OpenAI released the newest form of its GPT-3.5 software. Following its launch, ChatGPT amassed 1M users in just five days, making headlines in the tech industry, just weeks after releasing image generation program Dall-E 2.

Microsoft (MSFT) is also eager to get some skin in the game (remember Tay from 2016?), holding advanced talks to increase its investment in OpenAI. In 2019, Microsoft even poured $1B into the startup and became its preferred partner for commercializing new technologies. Reports this week also suggested that it's working on a version of Bing that uses the artificial intelligence software behind ChatGPT to close the gap with search engine leader Google (GOOGGOOGL).

What is Generative AI? OpenAI is a leader in the field, which uses artificial intelligence to generate new original content, rather than analyzing or acting on existing data. Its product called ChatGPT uses natural language processing to generate responses to a user's input, and can handle a wide range of queries. Examples include anything from essays and cover letters to lyrical music writing and solving complex math problems. (115 comments)

Gridlock on the Hill

Following 11 ballots that came up short, the U.S. House entered a fourth day of the new Congress on Friday without a speaker. A protracted stalemate over the candidacy of Kevin McCarthy has left the chamber paralyzed and there doesn't appear to be a resolution in sight. Around 20 hardline conservative GOP holdouts have left McCarthy without the needed 218 votes to lock down the gavel, citing worries over his fiscal discipline and their views not being prominently reflected in the party's agenda.

What it means: The situation is effectively bringing the legislative branch of the government to a standstill. Congress is unable to pass legislation, while representatives cannot offer formal services to their constituents. It has also prevented the installation of committee chairs or work on panels and hearings, while blocking lawmakers from accessing classified intelligence that is only available to Congressional members after they have taken their oath of office.

"Watch over the seeming discontinuity of our governance, and the perceived vulnerability of our national security," said House Chaplain Margaret Kibben. "Build your hedge of protection against those who would take advantage of our discord for their own gain."

How does it end? The drama has already resulted in the longest contest for speaker since 1859 and tensions are rising. McCarthy has given into some concessions - such as a rule change for votes to oust a sitting speaker and expanding the number of seats on the powerful House Rules Committee - but they have failed to produce a breakthrough thus far. If McCarthy cannot unite the Republicans, the party would have to search for an alternative, or go the unlikely route of striking a deal with Democrats on a unity candidate that would need support from both parties. (7 comments)

CES 2023

What happens in Vegas stays in Vegas, except at CES... hopefully. The world's biggest tech expo, known as the Consumer Electronics Show, is kicking into high gear with more than 170,000 people in attendance. Over 3,200 exhibitors are optimistic that the technology displayed at the event will spread into the broader market, and with many on the hunt for innovations of the future, there's a good chance that it will.

Some revelations: Sony (NYSE:SONY) is teaming up with Honda (NYSE:HMC) on a new brand of electric vehicle called Afeela, while BMW (OTCPK:BMWYY) unveiled its "i Vision Dee" concept car that changes color. Samsung (OTCPK:SSNLF) advanced a new era of screens with its pricey Micro LED technology and ASUS (OTC:AKCPF) revealed a laptop with the first 3D screen that does not need a pair of glasses. Google (GOOGGOOGL) is also finally jumping into media sharing, allowing phones to share music to a speaker running Android, regardless of which company made the device.

There were other strange and surprising gadgets like L'Oréal's (OTCPK:LRLCF) eyebrow printer, electric powered in-line skates, and a toilet insert that can analyze urine to see if you're drinking enough water or track the reproductive cycles of women.

Other companies with a presence at the show: Abbott Laboratories (NYSE:ABT), Adobe (NASDAQ:ADBE), Advanced Micro Devices (NASDAQ:AMD), BlackBerry (NYSE:BB), BMW (OTCPK:BMWYY), General Mills (NYSE:GIS), General Motors (NYSE:GM), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Palantir (NYSE:PLTR), Qualcomm (NASDAQ:QCOM), Samsung (OTCPK:SSNLF), Uber (NYSE:UBER), Verizon (NYSE:VZ), Walmart (NYSE:WMT) and Warner Bros. Discovery (NASDAQ:WBD).

Today's Markets

In Asia, Japan +0.6%. Hong Kong -0.3%. China +0.1%. India -0.8%.
In Europe, at midday, London +0.3%. Paris +0.3%. Frankfurt flat.
Futures at 6:30, Dow +0.1%. S&P flat. Nasdaq -0.3%. Crude -0.3% to $73.44. Gold +0.1% to $1841.80. Bitcoin -0.6% to $16,714.
Ten-year Treasury Yield unchanged at 3.72%

Today's Economic Calendar

8:30 Non-farm payrolls
10:00 Factory Orders
10:00 ISM Service Index
11:15 Fed's Bostic Speech
12:15 PM Fed's Barkin Speech
1:00 PM Baker-Hughes Rig Count
3:30 PM Fed's Bostic Speech

Companies reporting earnings today »

What else is happening...

Eurozone inflation rate slides to 9.2%, lowest reading in months.

Crypto collapse: Silvergate Capital (SI) tumbles amid customer withdrawals.

In wake of Avatar hit, Disney (DIS) sets course for change in 2023.

WWE (WWE) jumps 12% as Vince McMahon takes action to pursue a sale.

Mercedes-Benz partners with ChargePoint (CHPT) on charging network.

Delta (DAL) set to provide free Wi-Fi to most U.S. flights.

Bed Bath & Beyond (BBBY) plunges with bankruptcy a possibility.

Another downsizing: Stitch Fix (SFIX) cuts 20% of salaried workforce.

U.S. natural gas sinks again despite big inventory draw.

Putin orders 36-hour ceasefire in Ukraine for Orthodox Christmas.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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