February Jobs Report In Focus As Investors Weigh Interest Rate Hike; The Week Ahead

China’s Shanghai Composite Index closed down -2.86 percent percent in Asia on Monday after China’s Central Bank guided the yuan lower for the fourth consecutive session.

U.S. stock futures are pointing to a lower opening on Monday as investors shift their attention to February U.S. employment reports that will be released later in the week to provide more insight about the stability of the labor market and the likelihood of an interest rate hike occurring at the Federal Reserve’s next meeting in March (15-16th) that will be followed by a press conference by Fed Chair Janet Yellen and an update with economic projections.

Rising U.S. Inflation

On Friday the U.S. Bureau of Economic Analysis reported that U.S. inflation in January, as measured by personal consumer expenditures (PCE), rose 0.5 percent, up from 0.1 percent in December.

The January PCE price index increased 1.3 percent from January a year ago.

The PCE (core) price index, excluding food and energy, increased 0.3 percent, higher than the 0.1 consensus from briefing.com, and up from 0.1 percent in December.

Excluding food and energy, the January PCE (core) index increased 1.7 percent from January a year ago, up from up from the previous month’s upwardly revised 1.5 percent, marking the largest month over month rise since January 2012, and the highest annualized level since February 2013.

At 1.7 percent in January, inflation is clearly moving closer to the Fed’s 2 percent inflation target.

The second estimate of 4Q 2015 GDP also came in higher than expected on Friday with a reading of 1.0 percent versus the 0.4 percent consensus from briefing.com and up from the 0.7 percent in its first estimate.

Despite the market turbulence and sharp drift lower in January fueled by dropping crude oil prices and a decision by China’s central bank to devalue the yuan, the macro environment is looking more stable for the U.S. Federal Reserve to give more consideration to an interest rate hike.

Although Iran’s oil minister threw cold water late last week about the proposal from OPEC members Saudi Arabia, Qatar, and Venezuela to work with non-OPEC member Russia and freeze crude oil production at January levels, crude oil prices have stabilized during the past week and gained 3 percent based largely on the hope that a deal will be worked out alongside further easing talk.

U.S. Economic Calendar

Economists from briefing.com are forecasting a gradual increase in the non-farm payroll report in February that will be reported on Friday morning with a consensus forecast of 190,000 compared to 151,000 in January.

Private sector job increases through ADP will be reported on Wednesday.

The briefing.com consensus forecast is for a small drop with 190,000 private sector jobs compared to 205,000 in January.

Some of the other economic data that will be reported this week includes Chicago PMI for February on Monday, the ISM Index (Feb.) on Tuesday, ISM Services (Feb.) on Thursday.

Full Calendar

Monday- Chicago PMI (Feb.), Pending Home Sales (Jan.)

Tuesday- ISM Index (Feb.), Construction Spending (Jan.), Auto/Truck Sales (Feb.)

Wednesday- ADP Employment Change (Feb), MBA Mortgage Index, Crude Inventories (2/27), Fed’s Beige Book  (March)

Thursday- Initial and Continuing Jobless Claims, ISM Services (Feb.), Factory Orders (Jan.), Challenger Job Cuts (Feb.), Natural Gas Inventories (2/27).

Friday-Non-Farm Payroll Report, Trade Balance (Jan.)



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