Last Friday U.S. stocks came under heavy selling pressure off following the release of January’s non-farm payroll report that showed mixed data about the U.S. employment picture and economic outlook.
The Nasdaq dropped -3.25 percent, the Dow declined -1.29, and the S&P slid -1.85 percent.
For the week, which saw fluctuating swings in the price of crude oil and risk aversion, the Nasdaq erased -5.4 percent while the S&P 500 fell by -3.1 percent.
N.Y. Mercantile (WTI) settled down -2.74 percent on Friday at $30.86 a barrel, slightly above a 13 year low.
The 10 year Treasury closed at 1.85 percent and is hovering at lows not seen since April 17th as investors remain cautious about global growth, falling oil and commodity prices, the impact of the U.S. dollar on import prices and corporate earnings, and the prospect of future monetary tightening with the Federal Reserve in 2016.
The U.S. Bureau of Labor Statistics reported on Friday that non-farm U.S. payroll growth increased by 151,0000 in January, missing the consensus forecast from briefing.com of 188,000. During the past 3 months, job gains have averaged 231,000 per month.
On the positive side, the unemployment rate dropped to 4.9 percent, the lowest level in 8 years while average hourly earnings for all employees on private nonfarm payrolls increased by 12 cents to $25.39. For the year, average hourly earnings have risen by 2.5 percent.
Investors remain unclear about the future pathway of a future interest rate hikes in 2016. In December the Federal Reserve raised interest rates for the first time since June 2006 with a modest increase for the federal funds rate which increased from near zero, .025 percent to .050 percent.
During the Federal Reserve’s December policy meeting, 4 interest rate hikes were forecast on the Fed’s plot chart for 2016 and investors have been combing through mixed U.S. data for signs about the likelihood of a approaching interest rate hike which could emerge as early as the Fed’s next policy meeting on March 16th that will be followed by a press conference with Fed Chairwoman Janet Yellen along with updated economic projections from Committee members at the Fed.
This coming week Fed Chairwoman Janet Yellen will participate in the semi-annual monetary policy meeting in Congress.
Yellen will appear before the House Financial Services Committee on Wednesday February 10th at 10:00 a.m. followed by a meeting with the Senate Banking Committee the next day.
The market will be paying close attention to Yellen’s remarks about the strength of the U.S. economy and the timing of a rate hike.
On January 29th the Bureau of Economic Analysis reported that U.S. 4th quarter 2015 GDP came in weaker than expected and expanded at an annual rate of 0.7 percent during the advance reading, missing the consensus estimate of 0.9 percent from briefing.com.
U.S. inflation remains under pressure due to falling crude oil prices and a strengthening dollar.
The Fed’s preferred inflation gauge, PCE price index, rose just 0.1 percent in December compared with an increase of 0.4 percent in November.
The PCE price index, excluding food and energy, increased 1.4 percent from December on an annualized basis and remains below the Fed’s 2 percent inflation target.
The Week Ahead
Besides Fed Chairwoman’s 2 day meetings before Congress mid week, investors won’t have a lot of U.S. economic data to digest.
Retail sales for January will be reported on Friday with consensus estimates from briefing.com showing a slight uptick to 0.2 percent from -0.1 percent in December. Michigan sentiment (February) will also be reported.
Full Economic Calendar
Tuesday- Wholesale Inventories (Dec.)
Wednesday- MBA Mortgage Index (2/6), Crude Inventories (2/6), Treasury Budget (January)
Thursday- Jobless Claims (Initial and Continuing), Natural Gas Inventories (2/06)
Friday- Retail Sales (January), Michigan Sentiment (December), Import/Export Prices (January), Business Inventories (December).