Daily Market Color January 31, 2018FOMC Holds Rates Steady with Powell Reign Set to Begin Yellen’s Final Meeting This afternoon Janet Yellen concluded her final FOMC policy meeting as Fed Chair, ending her four-year term, with Jerome Powell set to take over the reins on February 3rd. As anticipated by market pundits, the Committee unanimously voted to hold its current policy in place, while stating its expectation for inflation to reach its 2% target during 2018. With the long awaited rise in consumer prices now in sight, the FOMC’s statement placed emphasis on the need for “further” gradual increases to its benchmark borrowing rate, which currently has a target range of 1.25%-1.50%. “Inflation on a 12-month basis is expected to move up this year and to stabilize,” the text confirmed. Treasury yields/swap rates had a muted reaction to the meeting, with the yield on the 10-year note holding near 2.71% to conclude the trading session. Stocks Stem Two-Day Selloff Major US stock indices were able to finish marginally higher on the day, holding off a late-session downturn which resulted from the hawkish commentary in the FOMC statement. Overall, US equities finished the month with the best start to a year in over two decades while bond markets have suffered their worst start since 2009. The impact from President Trump’s first State of the Union Address last night didn’t carry the same volatility as many projected, a reflection of a more conciliatory tone from Trump as he called for bipartisan support and unity in the nation. In commodities, WTI crude oil halted a two-day decline, finishing 0.6% higher for the trading session at $64.85/barrel. Robust ADP Payrolls, Again The ADP national employment report was released today, showing 234,00 new hires by private employers in the US in January, far exceeding expectations of 185,000. The figure represents a second consecutive month of robust employment metrics, as December’s number represented a nine-month high of 242,000. Steady employment gains were observed across most major industries, with payrolls in trade/retailers (+51k) and professional services (+46k) generating the most additions. Often a leading indicator for the Labor Department’s more comprehensive employment report, today’s ADP figure foreshadows steady gains in Friday’s nonfarm payroll data. However these series are not always in sync, as seen in last month’s +242,000 ADP figure vs. the Labor Department’s softer +148,000 level.
