💰A splendid January, Now It’s the Fed’s show🧮

The equity market broadly rose on Tuesday, backed by good economic data with a robust close for January. It comes after a treacherous start of January where the bear market haunted investors with inflation worry, the Ukraine war and China’s covid lockdown restriction. 

The splendid performance is supported by a constant stream of signs that inflation is waning and thus evoke hope that the Fed is very close to the end of its interest rate hike cycle that has dampened the demand for goods and services to cool the general price level in a hot economy.

🎙What could Uncle Powell speak today?🥃

There are multiple variations of possibility. Likely, Uncle Powell will still reinforce the continuity of interest rate hikes and discuss elements of the economy. Of course, investors will look closely at the FOMC statement for clues on the undertone of possibilities. Still, one could save the day without being too optimistic in any dovish tone. 

After all, inflation remains elevated, and the route to normalcy could still be distant. 

📦Employment cost is moderating📊

We also saw a green shoot on Tuesday’s data. The Employment Cost Index (QoQ) came in at 1.0%, a drop from 1.2% in the prior period and lower than the forecast of 1.1%. This is good news as slowing labour compensation growth can help reduce disposable income, promoting lesser demand for goods and alleviating demand-pull inflation. 

It is precisely what the Fed wishes to see and a day before the FOMC is welcoming. Markets cheered on the news, and with more earnings rolling in, traders will be digesting more on guidance rather than earnings dues of prior quarters. 

📮What are our dishes today? 📖

It is going to be a data-heavy day. 

First on the list is the ADP Nonfarm Employment change which will arrive at 9.15 pm and is expected to see a significant drop to 178K from 235K. 

Manufacturing PMI will come in at 10.45 pm, and we should see it remain at the same level of contraction at 46.8. 

ISM Manufacturing PMI will likely worsen from 48.4 to 48.0 when released at 11 pm.

Concurrently, the JOLTs Jobs Opening for Dec will likely see a slight downtick to 10.25M from 10.458M. Any drop in the figure is welcoming as the Fed wishes to see a cooling labour market. 

The highlight will be the FOMC Interest rate decision at 3 am, followed by the Press conference at 3.30 am. It is likely to be a roller coaster ride for traders. 

It is 1 Feb, 8.50 am in Singapore and 7.50 pm in New York. As we embrace a new month of trading with significant catalysts, we hope all friends of Pika World have yet another profitable month.