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2/5/24 Weekly Market Commentary

2/5/24 Weekly Market Commentary

February 05, 2024

What happened last week…         

The Federal Open Market Committee (FOMC) kept interest rates unchanged at 5.25% to 5.50% for the fourth straight time. In its statement, the FOMC said, “Recent indicators suggest that economic activity has been expanding at a solid pace” but noted it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” Fed Chairman Jerome Powell said, “We believe that our policy rate is likely at its peak for this tightening cycle.” Regarding the first rate cut Powell said, “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March is the time to do that.” Powell added, “We want to see more good data. It’s not that we’re looking for better data, we’re looking for a continuation of the good data we’ve been seeing.”

 

The ADP employment change missed expectations (150,000) as it decreased to 107,000 from the downwardly revised 158,000 (from 164,000). The unemployment rate landed lower than expectations (3.8%) as it remained at 3.7%. Nonfarm payrolls easily surpassed expectations (185,000) as it increased to 353,000 from the upwardly revised 333,000 (from 216,000). Average hourly earnings month-over-month landed higher than expectations (0.3%) as it increased to 0.6% from 0.4%.

 

The manufacturing PMI for January beat expectations (47.0) as it increased to 49.1 from the downwardly revised 47.1 (from 47.4). It is the highest reading since October 2022 but marks the 15th straight contractionary reading (below 50).

 

According to FactSet, as of February 2, 46% of S&P 500 companies have reported earnings with 72% having a positive EPS surprise and 65% having a positive revenue surprise. The blendedearnings for the S&P 500 is 1.6%, which would be the second-straight quarter of growth. The blended revenue for the index is 3.5%, which would be the 13th straight quarter of growth. 

 

Happening this week…

On Monday, the non-manufacturing PMI for January is expected to increase to 52.0 from 50.6, which was the lowest reading in seven months but is the 12th straight month of an expansionary reading.

Thanks for reading!

- The Rockline Team


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