Week of February 7, 2022

The U.S. equity markets posted solid performance last week.  The S&P 500 and NASDAQ advanced on Friday for their fifth positive session in the last six, and they posted their best week since December.  The Dow slid 0.6% on Friday but managed to gain 1.05% for the week.  The Russell 2000, which tracks small company stocks, posted its first positive week in the last five and the best week of 2022.

Last Friday the Labor Department reported that the economy added 467,000 jobs in January, well ahead of the 150,000 economists polled by Dow Jones were expecting.  “The increase in payrolls came as a welcome sign for the economy,” said Peter Essele, head of portfolio management at Commonwealth Financial Network.  “The increase sent confirmation to investors that rate hikes are imminent, with the first occurring in the March meeting.”

Big inflation news is coming Thursday when the Labor Department releases the January consumer price index (CPI).  Consensus economists expect to see the headline CPI jumped by 7.2% in January over the last year, which would mark the fastest rise since 1982.  On a month-over-month basis, the CPI will also likely march December’s 0.5% pace in January.

The markets have been bracing against the fallout from inflation and are now pricing in about a 35% chance that the Federal Reserve will hike its benchmark short-term borrowing rate by half a percentage point, or 50 basis points, in March.