Pivotal Week of Economic Data Features Jobs Report, Fed Meeting and the Mood of the Consumer

As the first month of the year comes to an end, a slew of economic reports out this week could be pivotal in setting the framework for what markets and the economy can expect in 2024.

There will be data on a variety of topics, including home prices, monetary policy, federal government borrowing needs, the mood of the consumer and the state of the labor market. Throw in earnings reports from a majority of the Magnificent Seven stocks that have helped drive the market for a year and there is quite a cocktail of economic reports. Microsoft, Alphabet (Google), Meta, Amazon and Apple are all due to report this week.

“This will be a big week on the macro front, with the (Federal Reserve) meeting on Tuesday and Wednesday, the Treasury’s latest Quarterly Refunding Announcement, quarterly earnings season in full swing, the employment report on Friday, and the awaited response from the U.S. following the bombing of a military base that killed three and severely injured at least 34,” said Richard de Chazal, macro analyst at William Blair.

Tuesday starts it off with the S&P CoreLogic home prices index for November. While somewhat dated, the index should capture the downturn in mortgage rates and give indications of whether home prices are holding up. Expectations are for a 0.3% increase in the median home price.

The day also brings a reading on January consumer confidence from the Conference Board. Consumers have been expressing a better mood as inflation comes down and incomes go up. Economists forecast a bump up from December’s number.

And then comes the first of a handful of measures of the job market, with the job openings number from the Labor Department for December. Openings have been trending downward and are expected to show another dip to around 8.7 million open positions from the prior month’s nearly 8.8 million number.

On Wednesday, private payroll firm ADP will issue its monthly jobs survey for January. After December beat forecasts with a gain of 164,000 jobs, expectations are for a pullback to 148,000. But the day will also bring two events that could have a material effect on the markets, especially for bonds.

First up is the Treasury Department’s quarterly refunding announcement, noting the amount and composition of debt the government intends to issue over the next three months. With interest rates on the downslope due to moderating inflation and the expectation the Federal Reserve will lower rates this year, exactly how much the Treasury plans to borrow and whether it is tilted toward short-term bills or longer-duration bonds is key.

A few hours after the Treasury announces, the Fed will also conclude its two-day meeting, the first of 2024, and issue a statement on interest rates. Most observers are anticipating no change in policy from the Fed, but the press conference afterward with Chairman Jerome Powell could offer clues as to when the rate-cutting may begin.

“Chair Powell will walk into the Fed’s headquarters with a song in his heart and a skip in his step after last week’s data releases showed both total and core inflation slowed to meet the central bank’s target in the second half of 2023,” said Bill Adams, chief economist at Comerica Bank. “Despite this, the Fed will hold the federal funds target unchanged at a restrictive 5.25% to 5.50% at Wednesday’s decision, and likely signal a cautious approach to returning rates to a more normal level.”

“The Fed got badly burned in late 2021 and early 2022 when they thought high inflation would be transitory, only to see it rebound and worsen,” Adams added. “They are determined to avoid making the same mistake twice.”

The week ends with Friday’s monthly jobs number for January. After December came in hotter than expected, with 216,000 jobs created, analysts are looking for a drop to around 180,000, though the trend has been for surprises to the upside.

Rounding out the week will be a report on consumer sentiment from the University of Michigan. The final reading for January is expected to show consumers feeling happier about the state of the economy and inflation.

Hanging over it all will be what President Joe Biden does in response to the killing of U.S. service members by what are believed to be Iranian-backed militants in the Mideast. The political environment remains heated, with Congress at a seeming impasse over negotiations on the border, decisions likely in legal proceedings affecting former President Donald Trump and developments in the 2024 presidential campaign.