We have a stock week ahead: it’s a hell of a week on Wall Street

New York (CNN) Wall Street investors are preparing for their version of hell week – a torrent of jobs data coming over the next few days could easily lead to volatile market swings.

The steady resilience of the US labor market is one of – if not the most the The biggest source of stress in today’s economy. Federal Reserve officials have said on numerous occasions that they believe high inflation rates will hold until employment numbers and the pace of wage increases turn lower. This means that the Fed’s already painful rate hikes are likely to continue until the labor market boils over.

But it still boils.

In just one year, the Federal Reserve raised interest rates from nearly zero to a range of 4.5% to 4.75% to calm the economy. Meanwhile, jobs numbers missed previous expectations over the past 10 months. The labor market is stronger than ever: the United States added a It hit 517,000 jobs in January and caused the unemployment rate to drop to its lowest level since 1969.

until Mass layoffs At companies like Facebook, Google, Goldman Sachs, Intel and Microsoft dominating the headlines, job openings remain unfilled. more than the number of job seekers At a ratio of approximately 2 to 1.

The Fed’s response was keep save.

“In order to put this episode of high inflation behind us, it will likely be necessary to tighten policy further, and to sustain it for a longer period,” Mary Daly, President of the San Francisco Federal Reserve Bank of Princeton University, said Saturday. “In the absence of a significant increase in the proportion of working-age adults looking to be employed or a significant change in migration flows, labor force participation will continue to decline and worker shortages will persist, leading to eventually higher wages and prices, at least sooner and later. medium term.”

Fed Governor Christopher Waller echoed Daley’s comments last week.

Recent data suggests that consumer spending is not slowing much, that the labor market remains unsustainably hot, and that Inflation is not going down As fast as I thought.”

“If these data reports continue to turn out to be too much, the policy target range this year will need to be raised further to ensure that the momentum that was there prior to the January data release is not lost.” Waller said, explaining why this attack on jobs data is so important to investors. If the job market remains strong, there will be more Fed pain ahead.

what are you expecting: On Wednesday, ADP’s special payroll report for February and the January Job Openings, Hires, and Resignations report are expected. On Thursday, Challenger, Gray and Christmas are due to release their February job cut numbers, and on Friday they bring in the main offering — the Labor Department’s monthly employment report.

Analysts expect the economy to add 200,000 jobs in February, which is lower than in January but still a historically high. The unemployment rate is expected to remain unchanged at 3.4%, according to a poll by Refinitiv.

The expected lack of movement in the unemployment rate has caused some economists to raise their forecasts for economic growth higher.

“We are stuck in the chaotic middle.” said Josh Hurt, chief US economist at Vanguard. “Activity has weakened in the most rate-sensitive sectors of the economy, but the underlying areas are still showing resilience. We are in this interlude where the effect of rates has not fully worked through the economy.”

Hurt said he expects the unemployment rate to likely rise from a 54-year low, albeit slowly and modestly, to around 4.5% to 5% by the end of this year.

It’s a great week in Washington, too

Wall Street and the Beltway are set to collide this week as key events in both monetary and fiscal policy consume the Capitol.

What is happening: Federal Reserve Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.

Powell will deliver the Semi-Annual Monetary Policy Report to Congress, then open himself up to hours of questions from lawmakers. We expect some more back and forth than we see at press conferences that follow policy decisions: Some lawmakers are not Fond of the Fed’s current rate hike system.

Preview the report He explains that the Fed chair plans to stress that more needs to be done to bring annual inflation down to the Fed’s 2% target.

On Thursday, President Joe Biden is expected to present his annual budget to Congress. The plan comes at a time of deep financial turmoil among lawmakers as debate rages over the debt ceiling – the maximum amount the federal government can borrow. Republicans, who control the House of Representatives, say they won’t raise the limit until there are deep cuts in federal spending. The White House refused to negotiate.

The president’s budget is typically used as a guideline for Congress to help shape spending priorities for the coming year. Wall Street investors will likely flock to the document in order to understand the market-shifting discussions that may be going off the pipeline.

Biden said his budget would help offset the rising costs of Medicare, Social Security and Medicare by raising taxes on the very wealthy. The president also proposed a “billionaire’s” tax last year. Other Biden proposals, such as raising taxes on capital gains and buying back corporate stocks, have Shocking Wall Street.

the next

Monday: US Factory Orders for January; Grindr earnings.

Tuesday: Federal Reserve Chairman Jerome Powell is expected to testify on the economic outlook and monetary policy before the Joint Economic Committee; Earnings from Dick’s Sporting Goods, Caseys General Stores, Squarespace and Dole.

Wednesday: European Central Bank President Christine Lagarde will deliver a speech on the February ADP employment report, Federal Reserve Chairman Jerome Powell is expected to testify on the economic outlook and monetary policy before the Joint Economic Committee, and February job openings. Earnings from Brown Forman, Campbell Soup, and MongoDB.

Thursday: February Challenger job cuts and US initial jobless claims; Earnings from Ulta Beauty, DocuSign, BJ’s Wholesale Club, and The Gap.

Friday: February Nonfarm Payrolls; Douglas Elliman earnings.