Does the Stock Market Still Care About US Jobs and Inflation Data?
Does the Stock Market Still Care About US Jobs and Inflation Data?
By:Ilya Spivak
Stock markets fell as traders soured on the Federal Reserve. Can US jobs and inflation data cheer them up?
- After nearly two days of deliberation, Wall Street decided it is unhappy with the Fed
- Catch-up releases of US employment and inflation statistics now take center stage
- Year-end monetary policy decisions from the ECB, the BOE, and the BOJ are on tap
Markets appeared to be wholly preoccupied with the Federal Reserve last week. The first half of the week was spent agonizing about what the central bank would do at its last policy conclave of the year, and the second half on what its actions really meant. In the final analysis, traders decided they didn’t like what they heard.
In the end, the bellwether S&P 500 finished the week down 0.7% while the tech-tilted Nasdaq 100 underperformed with a drop of 2%. Interest rates fell at the front of the yield curve, as did the US dollar. Those moves seemed to follow from the Fed’s unveiling of a new program of asset purchase of short-term Treasury securities.
Stock markets are belatedly disappointed with the Federal Reserve
Ultimately, that effort seemed to be overshadowed by a disappointing outlook for next year’s rate cut trajectory. December’s median forecast from members of the rate-setting Federal Open Market Committee (FOMC) still called for just one 25-basis-point (bps) cut next year, matching that of September. The markets are calling for at least 50bps.
The spotlight now turns to a slew of backdated economic releases derailed by the 43-day US government shutdown that started on October 1, the longest such lapse on record. Perhaps most critically, the Bureau of Labor Statistics (BLS) will update official employment statistics and publish the latest figures tracking US inflation.
November is expected to bring a 40,000 rise in nonfarm payrolls. The unemployment rate is expected to remain unchanged from September at 4.4%. An incomplete version of October’s data will also cross the wires. It will be based on partially conducted survey data.
US jobs and inflation data catch-up: does it still matter?
Meanwhile, consumer price index (CPI) figures are seen showing that headline inflation remained at 3% year-on-year last month. A matching print is penciled in for core CPI, a measure excluding volatile food and energy prices. These too would match September’s results. October’s CPI update appears to have been canceled altogether.
On balance, it seems unlikely that these figures are timely enough to change the Fed’s near-term calculus. Chair Powell warned that shutdown-affected data may be distorted at the press conference following last week’s FOMC sit-down. As it stands, the priced-in probability of another rate cut in January is just 24.4%.
Monetary policy announcements from the European Central Bank (ECB), the Bank of England (BOE), and the Bank of Japan (BOJ) are also due. The ECB is expected to remain on hold, this week and through next year. Its counterpart across the English Channel is up for a 25bps rate cut however, and Japan’s central bank issues an equivalent rate hike.
Ilya Spivak, tastylive head of global macro, has over 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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