Fed affects Wall Street More than Company Data
2023.01.31 14:30
Fed affects Wall Street More than Company Data
By Kristina Sobol
Budrigannews.com – The Federal Reserve and its intentions regarding interest-rate policy continue to dominate Wall Street sentiment despite the flood of corporate earnings.
Take for instance Tuesday, when bond yields dropped and stock futures surged in response to a wage report that typically receives little attention. On a day when companies like Exxon Mobil Corp (NYSE:) were experiencing a downturn, the employment cost index released by the Bureau of Labor Statistics dominated virtually every research note. as well as Caterpillar Inc. expressed their expectations for the year in comments.
For a report that the market typically pays little attention to, it’s a unlikely star turn. Typically, investors are captivated by the hourly wages section of the Labor Department’s monthly jobs report. However, macro sentiment was dominated by the BLS report due to the delayed release of January’s hiring data following the Fed’s policy decision on Wednesday.
Shawn Cruz, head trading strategist at TD Ameritrade, stated, “It’s one of those data points that doesn’t really matter until it does.” The market wants the Fed to know that inflationary pressures are decreasing and that things are beginning to slow down. According to this report, that is the case.
The employment cost index, which is a broad measure of wages and benefits, increased by 1% in the fourth quarter of 2022, which was slower than anticipated. Investors are trying to figure out how the Federal Reserve will proceed with its plan to raise interest rates, and the number has suddenly gained weight.
Mike Bailey, director of research at FBB Capital Partners, stated, “Everyone is holding their breath for Jay Powell’s next move.” Although investors have some last-minute agitation for this kind of inflation data, Powell has probably already decided.
As of 10:44 a.m. in New York, US stocks were up 0.6% and 0.8%, respectively. The S&P 500 is expected to rise by more than 5% in January.
Dennis DeBusschere, the founder of 22V Research, stated, “considered a gold standard data point on employment costs” regarding the ECI print. The doves on the FOMC should feel encouraged by this good news.
The Federal Reserve is expected to raise interest rates by a quarter of a point on Wednesday. This would be the Fed’s eighth increase in a row and the smallest in nearly a year. In response to traders’ expectations of rate cuts this year, Fed Chair Jerome Powell has maintained that rates must remain elevated until inflation has significantly decreased.
Despite this, Bailey of the FBB asserts that “only a massive outlier” could influence the central bank’s decision this late in the game. The markets will appreciate the cooler ECI print, but the real punchline is that the Fed is following the bond market’s lead and hiking rates less painfully,” Bailey stated.
