With earnings season winding down, macroeconomic factors will take center stage this week as investors digest jobs data, Fed commentary, and trade policy developments.
A stronger-than-expected jobs report may push rate-cut expectations further into the year, according to analysts at Deutsche Bank, while soft data could bolster market hopes for an earlier Fed pivot.
January’s payroll report is expected to show 175,000 job gains versus 256,000 in December, with private-sector payrolls rising by 150,000. However, forecasts are uncertain due to factors like Los Angeles wildfires, which may reduce hiring, and seasonal distortions from previous strong January gains. The unemployment rate is projected to hold at 4.1%, while wages may rise 0.4% month-over-month.
Meanwhile, clarity on tariff implementation will be crucial in determining whether global trade tensions weigh on risk sentiment.
The Trump administration plans to implement 25% tariffs on Canadian and Mexican imports and 10% tariffs on Chinese goods starting February 4. Analysts warn these tariffs could slow the disinflation process, potentially influencing the Fed’s rate decisions.
“It's too early to know exactly what impact tariffs will have on the global economy, but it is fair to say that they have a high potential of triggering inflation, and weighing heavily on global growth, including the US economy,” Kathleen Brooks, research director at XTB wrote on Monday.
Investors will scrutinize consumer sentiment data on Friday for signs of whether inflation expectations are shifting due to these policy changes. Fed Chair Jerome Powell remains non-committal on how trade policy will affect monetary policy, but upcoming speeches from Fed officials will be closely watched.
Key Economic Reports Ahead
Beyond Friday’s payrolls data, several other reports will provide additional context for the labor market:
- Monday: ISM Manufacturing Index (expected to improve to 50.4 from 49.3).
- Tuesday: JOLTS job openings (December data, key for assessing wage pressures).
- Wednesday: ADP private payrolls report (another 150,000 expected) and ISM Services Index (up 54.5 vs. 54.1 prior).
- Thursday: Initial jobless claims (steady at around 205,000 expected).
- Friday: Consumer sentiment (expected to rise to 73.1 from 71.1).
Most anticipated earnings
- Monday: Palantir
- Tuesday: Alphabet, Advanced Micro Devices, Merck, Pfizer, Pepsi
- Wednesday: Novo Nordisk, Disney, Qualcomm, Arm Holdings, Uber
- Thursday: Amazon, Eli Lilly