Week in Review: December 2, 2022


Week in Review: December 2, 2022

Resilience in jobs and wages keeps the Fed on track to keep hiking rates in December.


Market summary

U.S. equities were higher this week, as the S&P 500 rose higher than the 200-day moving average for the first time since April. Some of this week’s better-performing sectors included communication services, apparel and cosmetics. Treasuries were firmer across the curve, with the two-year yield ending the week under 4.3%, the lowest since the beginning of October, and the 10-year ending under 3.5%. The dollar index ended the week lower, falling at one point to its lowest level since June.

This week   

The November jobs report was stronger than expected, with job growth showing no signs of slowing and wage growth accelerating. Nonfarm payrolls rose slightly more than expected in November, by 263K (see Figure 1). Job gains were the strongest in the services sector, leisure and hospitality, healthcare, local government and even information, despite recent job losses in technology. However, retail jobs notably declined, signaling some cause for concern for retail sales as retailers typically increase staff at this time of the year to accommodate stronger demand around the holidays. We don’t expect this week’s labor market data to sway the Federal Reserve (the Fed) from hiking rates by 50 basis points (bps) at the December meeting of the Federal Open Market Committee (FOMC). 

The durability of the labor market is also reflected in the unchanged unemployment rate and rise in average hourly earnings. The unemployment rate remained at 3.7% in November. Wage pressures remain high, as average hourly earnings rose by 0.6% month over month in November, more than in October. We continue to see stronger wage growth in the services sector than in the goods-producing sector, a trend we expect to continue as consumers look for more experiences than goods. We expect that wage pressures will remain high in the near term; however, wage pressures should slow as the Fed continues to raise rates, inflation moderates and the economy slows. 

Although the job market remains tight, one indicator that conditions are moderating is that there were notably fewer job openings in October than September. The Job Openings and Labor Turnover Survey shows there were only 10,334K job openings in October, the lowest amount since mid- 2021, compared to 10,687K openings in the prior month. We expect that job openings will continue to decline in the upcoming months as growth slows and companies look to reduce their employment costs. We’re seeing some early signs that labor demand is starting to slow, as the employment report showed that people are remaining unemployed for longer durations, suggesting that workers aren’t able to find new jobs as quickly as in the past. 

Elsewhere, manufacturing continues to slow down, showing broader economic growth is moderating. November’s Institute for Supply Management (ISM) manufacturing index fell into contraction territory (to 49) for the first time since the start of the pandemic (see Figure 2). This decline was driven by the fall in new orders and employment, which reversed their recent gains. One bright spot is that faster supplier deliveries pointed to improving supply chain conditions and lower prices, which is encouraging news on the inflation front. We expect that the headline ISM manufacturing index will continue to weaken in the near term, as the underlying components that underscore growth are trending lower. 

Fed Chairman Jerome Powell signaled that the Fed will likely slow the pace of interest rate hikes going forward during his speech on Wednesday, cementing a 50-bp hike in December. Powell emphasized that there’s far more work to be done to restore price stability. Interest rates need to remain higher for longer to combat inflation and lower it closer to the Fed’s 2% goal. Powell highlighted that the Fed will continue to be data dependent, focus on the cumulative effect and rate hikes, and be closely monitoring the upcoming data. 

Going Forward

Equity and bond market volatility will remain elevated until the future path of inflation and rates is more certain as markets become comfortable with a “data-dependent” Fed that’s now focused on the cumulative effects of rate hikes. We remain defensive in our positioning, and we’d look for opportunities to upgrade portfolios during market weakness. Within equities, we continue to favor U.S. Large Cap exposure, since economic growth is rapidly slowing in Europe, which is close to a recession, and China’s strict COVID policies continue to weigh on manufacturing and growth. Within U.S. Large Caps, we favor segments exhibiting a defensive tilt toward low volatility, higher quality and shareholder yield. We remain defensive in our credit positioning, with short to at benchmark duration and higher in credit quality. We expect credit spreads to leak wider to account for recession risks. 



  • October’s durable orders are expected to rise by 1% month over month and will be released on Monday. 
  • November’s ISM Services Purchasing Managers Index is expected to decline to 53 and will be released on Wednesday. 
  • December’s preliminary Michigan Sentiment index is expected to increase to 57.2 and will be released on Friday.

Figure 1: U.S. nonfarm payroll employment

Sources: Bureau of Labor Statistics, First Republic Investment Management, as of December 1, 2022.

Figure 2: ISM manufacturing vs. service PMI

 ISM M vs S
Sources: Institute for Supply Management, First Republic Investment Management, as of December 1, 2022.


Market Returns (USD) as of 12/1/2022





Global Equities

MSCI All Country World

1.6% 15.1% -14.4% -10.7%

S&P 500

1.3% 14.1% -13.2% -8.2%

Dow Jones Industrial Average

0.7% 20.3% -3.4% 3.2%


1.8% 8.8% -26.0% -24.1%

Russell 2000

1.0% 13.3% -15.1% -11.2%

First Republic Founders Index

-0.1% 0.8% -32.1% -33.8%

Russell 1000 Equal Weighted

1.4% 15.3% -8.5% -2.0%


1.5% 20.4% -12.2% -9.4%

MSCI Emerging Markets

3.5% 12.0% -18.4% -17.9%

Fixed Income

ICE BofAML Municipals 1-10 Year A-AAA 

0.7% 2.9% -5.0% -5.0%

Bloomberg Barclays Intermediate Government/Credit

1.0% 2.3% -7.6% -7.7%

Bloomberg Barclays High Yield Bond

1.0% 5.7% -9.9% -8.3%

Market Levels


Week Ago

Year End

Year Ago

S&P 500

4076.57 4026.12 4766.18 4688.67

Dow Jones Industrial Average


34395.01 34347.03 36338.3 35931.05

10-Year U.S. Treasury Yield (Constant Maturity)

3.53% 3.68% 1.51% 1.61%

Gold ($/oz)

$1,803.09 $1,754.93 $1,821.90 $1,867.63

Crude Oil ($/barrel)

$81.22 $76.28 $75.21 $78.36

U.S. Dollar / Euro ($/)

1.05 1.04 1.14 1.13

U.S Dollar / British Pound ($/£)

1.23 1.21 1.35 1.35

Japanese Yen / U.S. Dollar (¥/$)

135.93 139.19 115.16 114.55

Bitcoin Futures ($/XBT)

$16,820.00 $16,497.05 $47,977.03 $60,485.00