The Dow Jones industrial average ended the first session of this week with an increase of 0.12%, remaining unchanged at 33,431.44 points. The S&P500, which was gaining nearly 0.8% at the halfway point of the session, ended the day with a score of 4,048.42 points, which is just 0.07% above Friday’s closing price. The Nasdaq Composite acted similarly, squandering the gains from the beginning of the trade and finally losing 0.11%.
The changes were therefore symbolic, but it is worth noting that the stock market bulls were short of breath on the third day of the upward rebound. And yet US stocks recently had their weakest week of the year and a clearly declining February.
Investors still have the right to worry about rising market interest rates. Despite a slight rebound on Friday, the yield on 2-year US government bonds remained close to 5% – values not quoted after 2007. 10-year Treasuries pay almost 4%, which is a decent alternative to the still highly valued US stocks.
In this context, Tuesday’s speech by Jerome Powell may bring something new. The head of the Federal Reserve will submit a semi-annual report on the implementation of monetary policy before the Senate committee. This is basically the last moment for Powell to signal another increase in the federal funds rate. The futures market expects a move of at least 25 bp. (70% chance) at the March FOMC meeting. But the chance of a 50-point raise is estimated at over 30%. Anyway, by the end of June the range of the federal funds rate is expected to reach 5.25-5.50%.
The second potential turning point in the macroeconomic calendar is Friday’s labor market report. Economists expect him to show only 200,000. new jobs created in February after the sensational +517,000 that we saw in the statistics for January. Of course, all sorts of revisions are involved, which can further blur the picture of the situation. A strong labor market coupled with stubbornly high inflation is a combination that basically guarantees higher interest rates at the Fed. And the stock market (especially so “richly” valued) does not like them very much.
“On the way” we also have Wednesday’s ADP report measuring the change in employment in the private sector. Here, expectations speak of 195,000. new jobs, but after an increase of only 106 thousand. reported for January. After all, the week on Wall Street will begin in earnest after Powell’s speech on Tuesday, and it will be crowned by February’s payrolls.
