Data Strikes Back Against 2023's Strong Start

The past two days of moderate gains have been "nice," but they were just a prologue to the more relevant opening days of 2023.  For the last 2.5 weeks, we've been focused on "the end of the first week of January" as the next relevant trading opportunity.  The reason is simple: that's when the data starts to flow.  Tomorrow's NFP is certainly the focal point, but traders are getting an early start with today's stronger ADP data providing an early selling cue.  Stronger Jobless Claims data followed 15 minutes later and added to the selling pressure.

The typical "Fed accommodation trade" played out with stock prices and bond yields moving in a mirror image.  In short, anything that's good for the labor market is bad for both stocks and bonds because it suggests persistently tight monetary policy from the Fed.