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There was a lot of significant news released to start the month. The two most consequential pieces were the Federal Reserve’s rate decision on Wednesday and the January jobs report that was released on Friday morning.

The Fed decided to keep interest rates steady at a range of between 5.25 percent and 5.5 percent. Fed Chairman Powell said that while rate cuts were still likely this year, there is no timetable for them to happen. While many still believe that a rate cut could occur in March, there are some who believe that rate cuts could trigger a new wave of inflation.

Effectively, if rates were reduced, it would likely spur a new round of borrowing and spending as money would be less expensive to borrow. Ultimately, it could push prices back up before the inflation rates get back to 2 percent. Over the past several months, inflation in the United States has ranged between 3.1 percent and 3.5 percent.

In January, the economy added 353,000 new jobs, which was roughly double the 187,000 forecast prior to the release of the jobs report issued by the Bureau of Labor Statistics (BLS). The initial reaction was that this would be another sign that economic conditions are not sufficiently cool to warrant a rate cut soon.

However, this figure does vary widely from the employment report issued by ADP on Wednesday that found there were only 109,000 jobs added in January. Therefore, it’s possible that one or both reports are revised over the next several weeks.

Also on Friday, it was revealed that average hourly earnings were up .6 percent on a monthly basis and that the unemployment rate remained stable at 3.7 percent. An increase in wages may also put upward pressure on prices, which could make it harder to justify cutting rates in the first half of 2024.

On Tuesday, the Consumer Board (CB) Consumer Confidence Report was issued and came in at 114.8. This was significantly higher than the 108 reading from a month ago and was slightly higher than the 114.2 forecast before the report came out.

The University of Michigan also released its consumer confidence report on Friday, and it came in at 79, which also indicates that consumers feel fairly good about where the economy was headed.

All three major indices reacted strongly to the Fed and jobs reports news. The Dow was up over 500 points to close at 38,654 thanks to a strong push on Friday that accounted for over 240 points of that gain. On Monday, the market would make its weekly low at 38,071 before going into a trading range for the next several days. On Thursday, the Dow would retest the weekly low before rebounding and finishing near the high of the week on Friday.

The Nasdaq was up about 170 points this week thanks to a strong Friday session that saw the market gain almost 300 points on the day. On Wednesday, the Nasdaq made its weekly low of 15,183 before reversing and hitting a high of 15,650 on Friday afternoon.

Finally, the S&P 500 would finish the week about 1.5 percent higher to close at 4,958. Like the Nasdaq, the S&P would make its low of the week on Wednesday when it dipped to 4,850 before rebounding sharply on Friday to finish near the weekly high.

In international news, retail sales had dropped 2.7 percent over the past month in Australia while inflation in that nation had dropped to 3.4 percent on an annualized basis. In Canada, gross domestic product (GDP) was up .2 percent on a monthly basis while in Great Britain, the central bank decided to keep interest rates steady at 5.25 percent.

The upcoming week will be a relatively slow one in terms of news announcements in the United States. On Monday, the ISM Services PMI will be released while unemployment claims data will be released as usual on Thursday. Internationally, Australia’s central bank will be making an interest rate decision while Canada will be releasing employment change and unemployment rate data on Friday.

The final full week of January offered some important clues as to the strength of the economy. It also provided some context for what the Federal Reserve may do over the next several months. On Wednesday, the first impactful pieces of news was released with the Flash Manufacturing PMI and Flash Services PMI reports being released.

The Flash Manufacturing PMI came in at 50.3 percent, which was higher than the expected 47.6 percent. As for the Flash Services PMI, that report came in at 52.9 percent, which beat the expected 51.4 percent. Anything over 50 percent is considered a sign of an expanding market, which means that both the manufacturing and service sectors may experience growth in the first half of the year. If this is the case, it may indicate that the Fed will have to reconsider cutting rates as doing so in a strong economy could reignite inflation risks.

On Thursday, perhaps the most important data point of the week was released when the advance gross domestic product (GDP) for the previous quarter was made public. It was expected that the economy grew by 2 percent in the final months of 2023. However, the official report indicated that the economy actually grew by 3.3 percent during the period.

However, it was also revealed on Thursday that unemployment claims rose to 214,000 compared to 189,000 last week. Furthermore, prices of goods accounted for in GDP calculations only rose 1.5 percent compared to an expected 2.3 percent. This could be evidence of downward pressures on wages and prices of goods that might otherwise drive inflation higher.

On Friday, it was revealed that the Core PCE Price Index came in at .2 percent month-over-month in December, which was in line with expectations. Also on Friday, it was revealed that new home sales jumped by 8.3 percent compared to an expected 2.1 percent. This is important because demand for homes can lead to a rapid increase in prices, and housing costs have been one of the biggest hurdles to overcome in the quest to get inflation back to 2 percent.

The S&P 500 once again flirted with all-time highs as it finished the week at 4,890. For the week, the market was up .73 percent and is now up 2.45 percent for the year. On Wednesday, the S&P would make its high of the week at 4,903 while it would make a low of 4,844 on Tuesday morning.

The Dow would also finish the week higher, finishing up .45 percent at 38,109. On Wednesday afternoon, the market hit its weekly low of 37,816 before rebounding and closing at the high of the week. A rally that started on Thursday afternoon and lasted through Friday would account for almost all of the gains the market realized this week.

Finally, the Nasdaq would finish the week up .41 percent to close at 15,455. It would reach a high of 15,624 on Wednesday before easing back the rest of the week. The low of the week was hit on Tuesday when the Nasdaq dipped to 15,354.

In international news, the Bank of Japan (BOJ) held its interest rate steady at -.10 percent on Monday as inflation in the country cooled from 2.8 percent to 2.6 percent. The Bank of Canada (BOC) held that nation’s interest rate at 5 percent for the fourth straight meeting, which is seen by some as a sign that a rate cut may be forthcoming there too. On Thursday, the European Central Bank also kept the main refinancing rate at 4.5 percent.

The upcoming week will feature a couple of major reports as nonfarm payroll and unemployment numbers for January are expected to be released on Feb. 3. On Wednesday, the FOMC is scheduled to meet and release its upcoming rate decision. It is widely expected that the interest rate will remain in a range between 5.25 percent and 5.5 percent. Other important news include the CB Consumer Confidence Report and Job Openings and Labor Turnover Survey (JOLTS) that will be released on Tuesday.

Overseas, Australia will release its inflation figures for the previous month on Tuesday night. It is expected that the country’s inflation rate will have dipped from 4.3 percent to 3.7 percent on an annualized basis. In addition, Canada will release GDP numbers for the previous quarter while Great Britain will make another interest rate decision. As with most other developed nations, Great Britain is expected to hold rates steady.

The third week in January was another truncated one as markets were closed Monday for the Martin Luther King Day holiday, there was still a significant amount of interesting news. The first major piece of news to be released in the United States was on Wednesday when retail figures were made available.

Over the past month, retail sales were up .6 percent while core retail sales were up .4 percent over that same period. Analysts had expected increases of .2 percent and .4 percent respectively. It’s possible that the higher figures were reflective of the holiday season during when consumers tend to be enthusiastically spending. It may also be a sign that the economy is still too hot to handle a rate cut soon.

On Thursday, unemployment claim figures for the past seven days were made available, and it was revealed that 187,000 people had filed for benefits during that period. This was compared to 203,000 a week ago and an expected 206,000 for the current period.

On Friday, preliminary consumer sentiment and inflation expectation data were released by the University of Michigan. The reports found that consumer sentiment was 78.8 percent, which was significantly higher than the projected 69.8 percent and much higher than last month’s reading of 69.7 percent. Inflation was expected to be at 2.9 percent a year from now compared to an expectation of 3.1 percent during last month’s reading.

The S&P 500 finished the week up .89 percent to close at 4.839. On Wednesday, the market reached its low of the week at 4,717 while it closed at the high of the week on Friday. The index is currently at an all-time high and some analysts believe it has the potential to eclipse 5,000 at some point this year.

The Dow was relatively flat this week finishing up .13 percent over the past four trading days. On Wednesday, the market hit a low of 37,141 before rebounding and closing at the high of the week at 37,863. In fact, the Dow spent most of the week in the red before surging 345 points on Friday to eke out a modest gain.

Finally, the Nasdaq was up 1.98 percent this week to close at 15,310 and is now just 215 points away from its all-time high. On Wednesday, the market hit its low of 14,722 and would continue to rally through the end of the day on Friday.

Oil would continue to remain range bound making a low of $70.72 on Wednesday and a high of $74.70 on Friday. During the week, an American oil tanker was attacked in the Red Sea near Yemen, which likely spooked markets during the middle of the week. Any prolonged conflict involving American oil interests may help the market break out of its recent trading range.

Gold made a high near $2,060 an ounce on Monday before falling back to $2,005 an ounce on Wednesday. The market would rebound to close the week at $2,030 an ounce.

In international news, it was revealed on Tuesday that inflation in Canada increased to 3.6 percent on an annualized basis from 3.3 percent a month ago. China revealed that retail sales were up 7.4 percent on an annual basis while gross domestic product was up 5.2 percent on an annualized basis over the past quarter. In Great Britain, inflation was up to 4 percent from 3.9 percent a month ago while retail sales fell 3.2 percent compared to last month. Finally, in Australia, the unemployment rate remained at 3.9 percent from November to December.

A number of important reports will be released this week. On Wednesday, the Flash Services PMI and Flash Manufacturing PMI figures will be made public. On Thursday, advance GDP data for the last quarter will be made available while the Core PCE Price Index will be released on Friday.

A slew of monetary policy decisions will be forthcoming from central banks around the globe including Japan and most of the major economies in the European Union (EU). The Bank of Canada (BOC) will also release its latest rate decision, and when taken as a whole, what other banks do might provide some insight into what the Fed has planned in March.