10 Things You Need To Know: February 7, 2023
Key data releases this week include: trade balance (Tue), consumer credit (Tue), initial jobless claims (Thu), and consumer sentiment (Fri).
Trading Economics
February 3, 2023
The US economy unexpectedly created 517K jobs in January of 2023, the most since July, and way above an average monthly gain of 401K in 2022, easily beating market forecasts of 185K. The January data continued to show a tight labor market although some companies prepare for an economic slowdown and the tech layoff continues.
Trading Economics
January 31, 2023
Compensation costs for civilian workers in the US increased 1% on quarter in the last three months of 2022, a third straight slowdown, compared to a 1.2% rise in the previous quarter and slightly lower than market forecasts of 1.1%. Year-on-year, compensation costs rose 5.1%, slightly above 5% in Q3, but adjusted for inflation, they fell 1.3%.
Fannie Mae
February 3, 2023
The FHFA Purchase-Only House Price Index rose 8.1 percent compared to a year ago in November, a deceleration of 1.7 percentage points compared to October. On a seasonally adjusted basis, prices fell 0.1 percent over the month, their third decline in the past five reported months.
Trading Economics
February 3, 2023
The ISM Services PMI for the US unexpectedly jumped to 55.2 in January of 2023, rebounding sharply from over a 2-1/2 year low of 49.2 in December, and beating market forecasts of 50.4. employment was unchanged (50 vs 49.4) as some companies still find it difficult to fill open positions, while others are facilitating staff reductions. Also, price pressures eased (67.8 vs 68.1) and supplier deliveries (50 vs 48.5) indicated unchanged performance.
Reuters, The WSJ
February 2, 2023
The European Central Bank raised its key interest rate by 50 basis points and signaled it would likely impose a similar hike at its March meeting before considering a pause. This marks the ECB’s fifth consecutive hike and brings its key rate to 2.5%, its highest level in 15 years. The central bank said it would “stay the course in raising interest rates significantly.”
The Guardian, The Associated Press
February 2, 2023
The Bank of England on Thursday raised its benchmark rate by 50 basis points to 4%, a 15-year high. The central bank signaled the latest move could be the peak for rates, though signs of persistent inflation could warrant further increases. “If there were to be evidence of more persistent [inflationary] pressures, then further tightening in monetary policy would be required,” the BoE Monetary Policy Committee said.
The Associated Press, The Wall Street Journal
February 1, 2023
The Federal Reserve announced a 25-basis-point interest-rate hike and indicated that more increases will be necessary despite signs of moderating price pressure. “We will need substantially more evidence to be confident that inflation is on a long, sustained downward path,” Fed Chair Jerome Powell said.
Bloomberg
January 30, 2023
After the current period of inflation ends, the US could face persistent weak inflation as the next long-term challenge, Treasury Secretary Janet Yellen says. Yellen notes that, unlike in the 1970s and 1980s, the recent inflation has not triggered a wage spiral. “We’re just coming through an unusual and difficult period, but I do not think we’re in any way back to the ’80s and ’70s,” Yellen said.
Bloomberg
February 5, 2023
History also says that whether there’s a recession or not will be crucial for stocks. Since World War II, there have been nine bear markets that have been accompanied by recessions, and on average the S&P 500 has declined 35% versus 28% for bear markets that didn’t come with economic downturns.