Major US stock indexes ended the week in the red, despite a rebound on Friday. The market awaits key economic data releases, including the ISM services index and the December employment report, as well as the minutes from the December FOMC meeting. Citi strategists expect the minutes to reflect a cautious stance by the Fed, but anticipate further rate cuts as inflation cools and the labor market softens.
Friday’s gains ended a five-day losing streak for the Nasdaq and S&P 500 . However, the rally wasn’t enough to pull the major indexes into positive territory for the week. The S&P 500 slipped 0.48% over the week, while the Dow dropped 0.60%. The Nasdaq Composite was down 0.51%.The ISM services index on Tuesday and the employment report on Friday as the key economic releases this week. Moreover, the minutes from the December FOMC meeting are set to be published on Wednesday.
Citi strategists project the addition of 120,000 new jobs in December, with the unemployment rate expected to climb to 4.4%. However, they note that the risks lean towards weaker employment figures. “With Treasury real yields and the dollar at recent highs – despite 100bp of Fed rate cuts – the economy should continue to cool until the Fed resumes cutting policy rates,” strategists led by Andrew Hollenhorst said in a note. 'Over the next few months, we expect attention to shift away from inflation and back toward the still softening labor market,” they added. As for the December FOMC minutes, Citi expects the release to reflect the overall hawkish tone, noting that four Fed officials opposed rate cuts and expressed concerns over stubbornly high inflation. However, the minutes are also likely to highlight that most officials anticipate further rate reductions ahead. Strategists believe that as inflation trends towards 2% and the labor market continues to weaken, the Fed may implement rate cuts more aggressively and deeply than markets currently expect.has pushed through the 4.50% threshold we highlighted. This has driven narrower breadth recently. We favor the quality factor and industries showing strong EPS revisions (: “We think that the repeat of 2017 performance is unlikely, given starting stretched positioning, as well as lack of fiscal room to manoeuvre, with bond yield levels much different to 2016, but the better economic activity and the deregulation drive remain the support
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