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| By Kenny Polcari |
We’re back with another episode of Market Minute today. I’m coming to you live from Palm Beach, and it’s an absolutely beautiful day!
Let’s get right into it … we had another interesting week last week with Fed Chairman Jerome Powell inspiring a rally on Wednesday when he confirmed what we expected: Rates will continue to go up, but possibly at a slower pace beginning this month.
Additionally, Powell said the Fed will move rates until they try to find the terminal rate.
We’ve always been told that the terminal rate is between 4.75%–5.25%, but there is talk that that number is actually going to start to inch up toward 5.5%.
Well, the algos, traders and investors went hog wild on Wednesday, taking the Dow up a whopping 700 points, along with the S&P 500 and the Nasdaq rallying 450 points, plus the Transports and the Russell all moving higher.
This was certainly not the reaction that Powell expected or wanted, because he’s trying to maintain the cool and let investors know we are on this path of higher rates for the time being.
And while the increment of hikes may slow a little bit, the fact is that they’re going to keep raising and raising until they get to what they think is the terminal rate, and until they see inflation really responding.
If we get to March and inflation doesn’t respond more to these actions, and if the economy isn’t slowing down and demand remains strong, we’ll have to expect rate hikes in April, May and June. But let’s wait until next year before we talk about that.
On Friday, we got a massively strong nonfarm payroll report. Expectations for 200,000 jobs to be created was beaten handily. The report showed 265,000 jobs created. Unemployment remained at 3.7%, and the average hourly earnings — both month over month and year over year — were up.
That’s only going to embolden Powell to remain aggressive in order to tackle this very stubborn and entrenched inflation.
Not surprisingly, stocks sold off hard Friday morning following that report. So it was a very interesting week between Wednesday’s rally and Friday’s sell-off.
This brings us to …
The Week Ahead
We don’t have a whole lot going on this week, but we do have some economic data coming out. The most important piece of economic data coming out this week is going to be Friday’s Producer Price Index.
That’s going to talk about inflation at the producer and manufacturing level — what manufacturers are paying for the products they put into production and that eventually get shipped out to the consumer.
Find out more details and what other data points are coming out this week by clicking below:
Click here to get my rundown and be sure to check your inboxes tomorrow for the next installment of my weekly video interview series, Wealth & Wisdom.
To your Wealth & Wisdom,
Kenny Polcari
Host
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