The U.S. stock market rally faces a crucial test in the upcoming week as investors eagerly await Federal Reserve Chairman Jerome Powell’s semiannual testimony to Congress and the official jobs report for February. According to portfolio manager John Luke Tyner of Aptus Capital Advisors, inflation has bottomed out but remains above the Fed’s objective, indicating that more labor-market weakness may be necessary.
The nonfarm payrolls data, set to be released on Friday, has the potential to significantly impact the markets, especially if job gains exceed the consensus expectation of 190,000. Tyner emphasized the importance of monitoring employment and wage growth in Middle America, noting that recent technology-related layoffs may not accurately reflect the overall labor market situation.
Despite the recent surge in stock prices fueled by expectations of interest rate cuts in 2024, analysts and investors are closely watching Powell’s testimony and the upcoming economic data releases to gauge the Fed’s future policy actions. Powell is expected to maintain a cautious approach and emphasize the need for greater confidence in falling inflation before considering rate cuts.
The week ahead will also see a series of key data releases, including factory orders, ISM service sector activity figures, private-sector employment report, and consumer-credit figures. Market participants will be closely monitoring these reports for further insights into the state of the economy and potential policy implications.
Overall, the stock market rally, which has seen significant gains in recent months, faces a critical juncture as investors await key economic data and Powell’s testimony to Congress. The outcome of these events could have a significant impact on market sentiment and future policy decisions by the Federal Reserve.
