March Madness

key takeaways

• Can Friday’s rally extend further into this week?
• Fed Chairman Powell testifies
• what will friday’s job number tell

Last week there was silence in most of the markets. Despite some healthy intraday volatility, the stock remained relatively unchanged. But a strong rally on Friday gave the indexes nice wins for the week, with the S&P 500 gaining nearly 2.5%, while the Nasdaq Composite added. After hitting an intraweek high of 4.07%, the yield on the benchmark 10-year note pulled back a bit and settled at 3.965% on Friday. But it will be a big week for economic news and we will see how the markets react.

You’re bound to hear it at some point this month. A team trailing by five, six or seven points with seconds remaining in the game. The announcers would then debate whether the team should go for a three point basket or a “quick two”. A similar question will be debated later this month when the Federal Reserve meets to discuss interest rates. Will it be a quarter mark or a half mark? Fed Chairman Powell’s testimony this week will certainly give us some insight into the Fed’s thinking. Then on Friday, we’ll take a look at February employment.

Economic data, inflation and interest rates will be the focus this week due to low income. A few weeks ago, it seemed all but assured that when the Fed met later this month, they would raise rates by a quarter point. Fast forward a bit and the picture is a bit more opaque. Heading into Monday, the market is predicting a 69% chance of a quarter-point increase, while the chance of a half-point increase now stands at 31%.

Meanwhile, the Chinese authorities have set a growth target of 5% for 2023. Many see the number as ambitious and a sign that Beijing is not planning a massive economic stimulus to boost growth. That news sent oil futures down about 1.5% in premarket trading.

Earnings season is all but over. I think it is safe to state the result as uninspired. While the numbers could have been much worse, little enthusiasm was offered as the economic picture lacks clarity. So, we are really waiting for the economic data to come out so that the Fed can decide the interest rate policy. Chairman Powell will deliver two days of testimony on Capitol Hill this week, beginning tomorrow. I’ll be listening closely to hear their thoughts on rate policy, not only for March, but for the rest of the year. Friday’s jobs number certainly could provide direction on rates as well. Right now, economists are looking for the creation of 200K new jobs and an unemployment rate of 3.4%.

Although the Fed chairman’s testimony is no Etta James, “at last,” there should be something to be said for hearing from Chairman Powell in a few days. While his testimony is always worth listening to, the uncertainty of the economy as a result of inflation is a challenge that the market has not faced for quite some time. Therefore, this week’s testimony is certainly one of the more important ones he has given. As always, I will keep up with your investment plan and long term objectives.

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