What a difference a week makes. Markets have their worst week in two years. It almost seemed like good news was treated like bad news in the markets.
“Not a heart attack. Just heartburn”. That was the title of the email from First Trust on Friday afternoon, referring to the market’s bumpy ride last week. Ok, after today’s trading (Monday)… maybe severe heartburn.
So what caused last week’s volatility? Part of it was concern over the 10-year interest rate rising closer to 3%. Part of it was concern over how many times the Fed might raise interest rates in 2018.
The Fed’s FOMC met for the first time this year Tuesday and Wednesday. It was Janet Yellen’s last formal meeting of the year. Jerome Powell took over for her this past Saturday. No changes were made. However, based on how the economy is doing, it’s quite possible the Fed could raise rates 3 to 4 times this year. Remember, the Fed raise interest rates 3 times in 2017, and the markets had no problem with that.
The Jobs number beat expectations last Friday. The consensus for the January number was 175,000 jobs, but came in at 200,000.
The U3 unemployment rate remained at 4.1%.
The big surprise came from the increase of average hourly earnings. December’s number was revised up from a +2.5% increase up to +2.7%. Expectations for the January number were for a +2.6% increase, but the actual number came in at +2.9%. Obviously higher wages is a good thing.
Factory orders in December came in +1.7%, up from +1.3% in November.
The first economic focus of the week: after a tough week, will markets rebound or continue downward. It’s too early to spot a trend, but last week’s downturn has caught people’s attention.
Companies reporting this week: Allergan, Archer Daniels Midland, Buffalo Wild Wings, Disney, GM, Goodyear, Invacare, Kellogg, Pandora, Penske, Steris, Sysco, Tesla, Timken, Toyota, Twitter, Tyson Foods, Viacom, Yum Brands, Zillow, and Zynga.
Indicator focus: January’s ISM non-manufacturing index (Mon); December’s international trade (Tue).
Have a great week,
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