The key US stock market indexes, such as the Dow Jones, NASDAQ and S&P 500, have ended their rally. Last week, at the beginning, they performed quite strongly. It even seemed that the correction would end quickly, and the stock market would return to its usual state of an uptrend in recent years. However, at the end of the week it became clear that we were rather at the beginning of a long correction and a prolonged consolidation. On Thursday, index quotations fell again and on Friday they opened and closed the day around the same level.
On Friday, quite important reports on the state of the US economy were released. In particular, the NonFarm Payrolls report was published, which in January amounted to 467,000 against forecasts of around 100,000. In addition, the previous Nonfarm payroll for December was revised upwards to 510,000. Thus, the January report was four times stronger than expected, and the December report, which had previously been considered a failure, now looks quite good. All in all, the US dollar had every reason to rise on Friday, as did the stock market. However, their movement has been extremely weak, which has little correlation with the report itself. The stock indices did not rise much, and the dollar added little. Perhaps other reports have distracted attention from NonFarm payrolls?
On the same Friday, it emerged that the unemployment rate had risen from 3.9% to 4.0%. However, this is not a terrible situation, as even 4% is a very low figure and by no means indicates that the trend is now negative. As with any instrument in any market, unemployment cannot fall continuously, as it has done over the past year and a half. Thus, a 0.1% increase could hardly have disappointed markets so much that they simply ignored the strong Nonfarm payrolls. Could it be about wages? It is also doubtful, as they came in above forecasts at the end of January. It turns out that markets have not taken advantage of the great opportunity to buy dollars and invest in US stocks and indices. This is at a time when often no foundation was even required for all of them to grow.
From our point of view, this is not a positive signal for both the dollar and the stock indices. We have previously said that 2022 was likely to be a difficult year as the Fed had set out to tighten monetary policy but (importantly) had not yet tightened it at all. For now, the QE programme is being phased out, but it is still going ahead. The first rate hike may take place in March.
