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Jobs week — What you need for the first week of 2018

Myles Udland
Markets Reporter

2018 has arrived.

With U.S. stocks coming off their best year since 2013, investors come into the second year of the Trump administration and the second-to-last year of the decade with Wall Street expecting higher stock prices amid corporate tax rates that have been slashed.

The year will begin with a little look back at 2017, as the December jobs report, auto sales, and key manufacturing readings will be released.

Economists forecast that 188,000 jobs were created in December while the unemployment rate should hold steady at 4.1%.

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On the earnings side, results from Monsanto (MON), Stanley, Black & Decker (SWK), and Constellation Brands (STZ) will be highlights.

Economic calendar

  • Monday: Markets closed for New Year’s Day
  • Tuesday: Markit manufacturing PMI, December (55.0 expected; 55.0 previously)
  • Wednesday: Construction spending, November (+0.5% expected; +1.4% previously); ISM manufacturing PMI, December (58.2 expected; 58.2 previously); Auto sales, December (17.5 million annualized pace expected; 17.4 million annualized pace previously); FOMC minutes
  • Thursday: ADP private payrolls, December (+190,000 expected; +190,000 previously); Initial jobless claims (248,000 expected; 245,000 previously); Markit services PMI, December (52.4 expected; 52.4 previously)
  • Friday: Nonfarm payrolls, December (+188,000 expected; +228,000 previously); Unemployment rate, December (4.1% expected; 4.1% previously); Average hourly earnings, year-on-year, December (+2.5% expected; +2.5% previously); ISM non-manufacturing PMI, December (57.6 expected; 57.4 previously); Factory orders, November (+1.4% expected; -0.1% previously)

The big themes for 2018

In 2017, the dominant narrative in financial markets was the lack of volatility amid a seemingly chaotic political environment.

In the U.S. stock market, the benchmark S&P 500 index had just 8 single-day moves in excess of 1%, the fewest since 1965. Accounting for dividends, the S&P was higher each month of the year, the first time this has happened in history, according to Ryan Detrick of LPL Financial. Any way you look at it, 2017 was a great year for investors.

Looking to 2018, Wall Street certainly expects that the good times will continue in the stock market, with at least three major firms calling for the S&P 500 to hit 3,000 by the end of the year. The S&P finished 2017 at 2,673.

In central banking, we’ll have a changing of the guard at the Federal Reserve with Jay Powell taking over for Janet Yellen in February. Meanwhile the European Central Bank will begin winding down its asset purchases during 2018.

Jerome Powell is set to be sworn in as the next chair of the Federal Reserve in February.

And while some investors may be tired of focusing on U.S. political drama, that is not expected to abate in 2018 as the midterm elections will start to pick up steam as a dominant theme in the news cycle.

Perhaps an overlooked markets story in 2017 was the flattening of the yield curve — or the compression in yields between short-term and long-term Treasuries — with inversion likely to occur in 2018. An inverted yield curve has occurred before each recession since World War II, though economists have been pushing out expectations for another economic downturn following the recent passage of tax cuts.

Expect more questions this year, however, about the end of the economic expansion.

And we would be remiss if we did not mention bitcoin and the other cryptocurrencies that defined the mania which captured the market’s attention in the final months of 2017. The price of bitcoin (BTC-USD) rose over 1,300% this year while some its smaller cryptocurrency brethren like ethereum (ETH-USD) and ripple (XRP-USD) had even larger annual gains.

But if the story of cryptocurrencies by the end of 2017 was simply that they were going up a lot in price, the story in 2018 seems likely to focus more on figuring out just what these things are for. And just what it says about markets and the economic cycle that digital assets created out of thin air that only a few people seem to really understand became the most exciting investment of the year.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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