The state of the US labor market and expectations on the Federal Reserve will be the main drivers of financial markets in the coming week.
On Friday, the February jobs report is expected to show that 200,000 jobs were created last month, a slowdown in the pace of job growth from the unexpectedly strong reading in January which showed 517,000 jobs added to the economy in the first month of the year.
The unemployment rate is expected to hold steady at 3.4%, the lowest level since 1969, according to data from Trading Economics.
Bank of America economists, led by Michael Gapin, wrote in a note to clients Friday that they “suspiciously… [January’s strong report] It was noisy and associated with unusually warm weather. The company estimates that job gains were closer to 350,000 in January, a number still much stronger than expected but close to the average monthly job gains seen over the past six months.
Wage growth will also be a major focus of the jobs report, with average hourly earnings expected to have increased 0.3% MoM and 4.7% YoY, with the year-over-year figure accelerating from the 4.4% increase seen last month.
Elsewhere in the economic calendar, Wednesday will hold the key data for the week with the ADP’s monthly read on private payroll growth, the January report on job prospects from the BLS, and the Fed’s Beige Book.
The main question for investors in the coming weeks will be whether the data from February supports the view that the US economy accelerated in the early part of 2023 or whether the strong reports prove it is a one-off.
For its part, Gapen’s team has consistently noted that higher costs of living adjustments for Social Security beneficiaries — as well as the aforementioned weather effects on the labor market — likely boosted spending in January.
Investors will also be watching Washington, D.C. this coming Tuesday and Wednesday as Federal Reserve Chairman Jerome Powell will speak before the Senate Banking Committee and the House Financial Services Committee on Tuesday and Wednesday morning, respectively.
In the Federal Reserve’s semi-annual monetary policy report to Congress published on Friday, the central bank reaffirmed its commitment to keeping interest rates high in an effort to lower inflation, writing: “The Fed is fully aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of necessities. The Committee is firmly committed to returning inflation to its 2 percent target.”
The Fed also included a chart showing the three main inflation measures — goods inflation, services inflation, and services inflation excluding housing — that officials have emphasized in recent months.
“Inflation of basic services prices remained high,” the central bank wrote in its report. Referring to housing prices rising rapidly, the Fed wrote: “Because housing services prices measure the rents paid by all tenants (and the equivalent rent paid by all implicit homeowners) — including those whose leases have not yet been renewed — they tend to They are slowly adapting to changes in rental market conditions and should therefore be expected to slow over the course of the next year.”
The central bank continued: “By contrast, prices for other essential services — a broad group that includes services such as travel and dining, financial services and auto repair — rose 4.7 percent over the 12 months ending in January and are yet to show clear signs of slowing down. It is likely that some softening in labor market conditions will be required for basic service price inflation to subside.”
Earnings-wise, results from Ulta Beauty (ULTA), Dick’s Sporting Goods (DKS) and BJ’s Wholesale (BJ) will be highlights as investors continue to focus on the retail segment.
In the past week, all three major averages are up with the Nasdaq advancing gains, up nearly 3% while the Dow and S&P 500 both posted weekly gains of just 2%. This comes as the 10-year Treasury note reached a four-month high during the week, eventually settling at just under 4% as investors continue to brace for more rate hikes from the Fed.
Overall, events this week should update investors on the Federal Reserve’s ongoing efforts to raise interest rates in an effort to curb inflation.
Andrew Hunter, deputy chief US economist at Capital Economics, writes: “The February employment report and Federal Reserve Chair Jerome Powell’s testimony before Congress next week should give a clearer indication of whether recent talk of higher rates ‘for longer’ is warranted.” ‘.
Monday: Factory orders, January
Tuesday: wholesale stocks, Jan; Federal Reserve Chairman Jerome Powell testifying before the Senate Banking Committee
WednesdayMBA mortgage applications; ADP Employment Report, February; January Trade Balance; Employment Opportunity and Labor Turnover Survey, January; Federal Reserve Chairman Jerome Powell testifying before the House Financial Services Committee; Federal Reserve Beige Book
Thursday: Challenger job cuts, February; Unemployment claims rates
Friday: US monthly jobs report, February
Monday: Lordstown Motors (ride); WW (WW)
Tuesday: Dick’s Sporting Goods (DKS); Casey General (Cassie); CrowdStrike (CRWD); Manchester United (Manu); Se Ltd (SE); stitch repair (SFIX); Thor Industries (THO)
Wednesday: Campbell’s soup (CPB); Brown Foreman (BF-B); Korn/Ferry (KFY); MongoDB (MDB); Children’s Place (PLCE); United Natural Foods (UNFI)
Thursday: Ulta Beauty (ULTA); Allbirds (birds); American Outdoor Brands (AOUT); BJ Wholesale (BJ); DocuSign (DOCU); fuel cell energy (FCEL); gap (GPS); JD.com (JD); National Beverage (FIZZ); Smith & Wesson Brands (SWBI); Vail Resorts (MTN); Zumiez (ZUMZ)
Friday: clamp (BKE)
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