Last Friday global markets reacted positively to a decision from Japan’s central bank to join the European Central Bank in adopting negative interest rates that helped spark a rally in stocks alongside weaker than expected U.S. 4th quarter GDP results that may cause policymakers at the U.S. Federal Reserve to delay making another interest rate hike in the near future.
On Friday the Dow Jones finished up 2.47 percent, the Nasdaq rose 2.38 percent, and the S&P gained 2.48 percent.
A strong earnings from Microsoft also helped to boost sentiment in the tech sector.
Shares of Microsoft increased 5.83 percent on Friday.
By a vote of 5-4 policymakers at the Bank of Japan decided on Friday to introduce a negative interest rate of -0.1 percent to current accounts that financial institutions hold at the Bank and will cut the interest rate further into negative territory if judged as necessary.
The change will become effective February 16, 2016.
Additionally, by an 8-1 vote the Bank of Japan agreed to increase its purchases of Japanese government bonds to an increased level of 80 trillion yen while purchasing exchange traded funds (ETF’s) at annual paces of 3 trillion yen and Japanese real estate investment trusts (J-Reits) at 90 billion yen.
On Friday the U.S. Bureau of Economic Analysis reported that U.S. GDP in the 4th quarter of 2015 rose .70 percent, below the .90 percent consensus from briefing.com and below the 2 percent reading in the 3rd quarter of 2015.
Personal consumption expenditures rose 2.2 percent versus 3 percent in the Q3 2015.
Exports fell 2.5 percent after increasing 0.7 percent in Q3. Imports gained 1.1 percent after increasing 2.3 percent in Q3.
Despite Friday’s strong finish, the month of January saw the S&P finishing down -5.1 percent, the Dow lost -5.5 percent, and the Nasdaq erased -7.9 percent as investors remained cautious about the tumble in crude oil prices in January that fell to a 13 year low, and weaker global growth, pushed lower by a string of negative economic reports in China and a decision by China’s central bank to devalue the yuan for the second time since August.
The Week Ahead
China’s official PMI and Caixin PMI are scheduled to be released on Sunday.
Investors will have lots of economic data this week to weigh this week, including an important inflation reading on Monday with PCE (December), the Fed’s preferred inflation gauge, in addition to manufacturing data from the ISM index for January also released on Monday.
Later in the week, auto sales on Tuesday and new job private sector jobs will come into focus with an ADP jobs report (Jan) on Wednesday followed by ISM services (Jan).
On Friday, a closely watched non-farm payroll report (January) will come into play and impact markets.
Economists from briefing.com have a consensus forecast of 0.1 percent increase with core PCE in December, matching the same level in November, while job gains are expected to weaken in January with both the ADP job report on Wednesday and the non-farm payroll report on Friday from the U.S. Labor Dept.
Briefing.com consensus forecast is for ADP job growth to weaken in January to 190,000, down from 257,000 in December while non-farm payroll gains are expected to drop to 188,000, down from 292,000 in December.
Full U.S. Economic Calendar
Monday-PCE prices, Core PCE, Personal Income, Personal Spending (Dec), ISM Index (Jan)
Tuesday- Auto-Truck Sales (Jan)
Wednesday- ADP Job Report (Jan), ISM Services (Jan), MBA Mortgage Index, Crude Inventories
Thursday- Initial and Continuing Jobless Claims, Challenger Job Cuts, Natural Gas Inventories, Factory Orders (Dec), Productivity -prelim (Q4), Unit Labor Costs-prelim (Q4).
Friday- Non-farm payroll report (Jan), Trade Balance and Consumer Credit (Dec)