Last week offered some impactful economic news, as we continue to see tremendous volatility in financial markets. On Wednesday, the Federal Reserve (Fed) raised rates by 25 basis points, as expected.1 Fed Chairman Jerome Powell stated that the “The disinflation process has started” and he did not push back the market pricing of two rate cuts during the second half of the year.2 The market took this as a green light to "buy everything” and rallied sharply. A quick return to slower growth and a lower-inflation environment quickly became the theme.
On Friday, the red-hot jobs report revealed an increase of 517K for January, while the unemployment rate reached a 50-year low.3 Average weekly hours also increased. This report and the Services PMI for January both show strong momentum in the economy, indicating that the weak economic data in December was likely an outlier and mainly caused by the extreme cold weather.4
The economic calendar is fairly light this week, with the main event being Powell’s speech at The Economic Club of Washington, D.C., on Tuesday.5 It will be interesting to see if he turns hawkish after the very strong jobs report.
1Source: Central Banking- Fed Slows Tightening Cycle Again With 25bp Rate Rise; 2/1/23
2Source: Fortune- Markets Rally on Dovish Powell Remarks as He Thinks ‘the disinflationary process has started’; 2/2/23
3Source: CNBC- January’s U.S. Jobs Reports was Stunningly Good; 2/5/23
4Source: Trading Economics- United States Services PMI; as of 2/6/23
5Source: MarketWatch- U.S. Economic Calendar; as of 2/6/23
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