Tech leads stocks lower, ahead of US Employment and Inflation reports

Macroeconomic/ geopolitical developments

• US markets diverged as the Dow rose 2.5% to record highs while the S&P 500 slipped 0.10% and the Nasdaq dropped 1.84%, with investors rotating away from growth and technology shares toward value, defensives, and smaller companies amid falling Treasury yields, weaker oil prices, and firmer gold.

• US labor market indicators weakened as ADP showed hiring of just 22,000 in January alongside falling job openings and rising layoffs, leaving investors to rely on softer alternative data while awaiting the delayed official payrolls report on Wednesday 11th February for clearer signals on economic momentum and Fed policy.
• US manufacturing and services activity both expanded in January, with the Manufacturing PMI hitting 52.4 and the Services PMI 52.7, reflecting stronger output and steady growth despite subdued export demand, cost pressures, and moderate hiring.

• Shares of Amazon and Alphabet fell as both companies reported solid revenue and growth but investor concerns over massive AI-related spending and its impact on future returns overshadowed the results.
• This week’s US economic calendar centers on the postponed January Jobs report and CPI release, due Wednesday 11th and Friday 13th February, with forecasts pointing to modest payroll growth, steady unemployment, and subdued inflation, while Retail Sales and corporate earnings will provide additional insight into the economy amid lingering shutdown-related uncertainty.

Global financial market developments

• US and global equity averages were mixed, but mostly lower.
• US and European bond yields were lower on the week
• The US Dollar Index moved higher.
• Gold futures chopped, erratically having plunged the prior week from a record high.
• Oil futures prices were lower.

Key this week

Central Bank Watch: It is a relatively light week for policy action, with attention instead turning to a series of speeches from Bank of England, European Central Bank and Federal Reserve officials.

Macro Data Watch: Attention this week will centre on the delayed US Employment report due Wednesday and US CPI Inflation figures on Friday. Additionally, other releases including US Retail Sales on Tuesday, China’s CPI on Wednesday, and GDP updates from both the EU and UK towards the end of the week.

Earnings Watch: The US fourth-quarter earnings is lighter than in recent weeks, though notable updates are still expected from Coca-Cola, Cisco, McDonald’s and T-Mobile throughout the week.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued