When It Comes To The Banking World, Where There’s Smoke There’s Almost Always Some Type Of Fire

Stock bulls grab the reins, pushing the S&P 500 its 16th record closing high of the year while the Dow and Nasdaq are both just shy of setting their own new record highs.

Investors’ attention yesterday was mostly centered on Federal Reserve Chair Jerome Powell’s second day of Congressional testimony. While Powell did not really provide any new details regarding Fed policy, he did say that the central bank was “not far” from being able to cut interest rates.

Powell’s comments overall were viewed as mostly “dovish” and bulls feel that confidence has been restored on Wall Street that rate cuts will happen as expected.

Economy

The outlook now is for the first cut to be made at the Fed’s June 11-12 policy, with a total of three or four -25 basis point cuts by the end of 2024. The next critical tests will be the February Employment Report, set for release this morning, and February CPI (consumer price index) due out next Tuesday.

For the February jobs report today, economists are forecasting a gain of +190,000 jobs versus +353,000 added in January. The unemployment rate is seen holding at 3.7% while hourly earnings are expected to pull back to an annual rate of +4.3% from 4.5% in January.

Along with CPI next week, bulls are looking for confirmation that January’s hotter-than-expected data was a one-off and believe softer reads on both the job market and inflation will allow stocks to continue marching higher.

Bears of course are warning that if the job market and inflation repeat last month’s show of strength, stocks are now poised to fall from even greater heights.

Keep in mind, Powell earlier this week said that the Fed is “not looking for better inflation readings than we’ve had. We’re just looking for more of them.” So even if the slowdown in inflation has stalled, it shouldn’t threaten Wall Street’s Fed policy outlook.

The NFP report today is really the only data of interest.

Earnings Season

On the earnings front, results are due from The Buckle. Next week, investors will have more inflation data to digest on Thursday with the Producer Price Index (PPI). Retail Sales and Business Inventories are also out on Thursday, followed by Import/Export Prices, Industrial Production, and Consumer Sentiment on Friday. Key earnings next week include Casey’s General Stores and Oracle on Monday; Kohl’s and On Holding on Tuesday; Dollar Tree, Lennar, and Williams Sonoma on Wednesday; and Adobe, Dick’s Sporting Goods, Dollar General, and Ulta on Thursday.