With the January FOMC behind us, markets enter the heart of this week recalibrating around labor data, services strength, and earnings follow-through. The focus has shifted away from rate decisions themselves and toward whether incoming data validates the Fed’s “hold and wait” stance — or challenges it.
This is a data-heavy week where jobs and services will ultimately determine direction.
Note: This publication was published on February 4th. Some of the numbers below reflect data that has already been released.
Where We Stand So Far
Manufacturing vs. Services Split
ISM Manufacturing (Monday)
Manufacturing remains under pressure, with ISM expected below 50 — consistent with ongoing contraction. Elevated input prices suggest cost pressures haven’t fully eased, reinforcing why policymakers remain cautious on inflation despite slowing growth in goods-producing sectors.
This weakness is not new — and markets largely treated it as confirmation, not surprise.
Key takeaway: Manufacturing continues to lag, but it’s no longer the driver of market direction.
Labor Signals Begin to Stack
JOLTS (Tuesday)
Job openings near 7.2M offered an early read on labor demand. Any continued cooling supports the case for stabilization rather than deterioration — important nuance ahead of Friday.
Fed Speakers (Early Week)
Multiple Fed voices reiterated patience, reinforcing the message delivered by the Federal Reserve last week: policy will remain restrictive until inflation progress is clearer.
Markets are listening — but not yet convinced.
Wednesday Focus: ADP & ISM Services
ADP Employment (Wednesday)
ADP near 48K serves as a tone-setter for Friday’s NFP. A weak print would raise downside labor concerns; a modest beat would reinforce the “cooling, not cracking” narrative.
ISM Services
Services remain the backbone of the economy. A reading above 53 would confirm continued expansion and help offset manufacturing softness. This data point carries extra weight given services’ role in wage pressure and inflation persistence.
What Still Matters Ahead
Thursday — Early Stress Check
- Jobless Claims (~213K): Any sustained move higher would matter more than a single data point.
- Layoff Data: Watched closely after recent earnings-related workforce commentary.
Friday — NFP Day 🔥
The week culminates with the labor report:
- NFP: ~67K
- Unemployment Rate: 4.4%
- Wages: ~0.3%
This print will shape expectations for the March FOMC and could quickly reprice rate-cut timing if it meaningfully surprises in either direction.
Market Backdrop
Equities pushed higher last week but lost momentum post-FOMC. Risk appetite faded as large-cap tech earnings kicked off and dealer gamma thinned — a setup that has historically increased sensitivity to macro surprises.
Sector leadership remains selective:
- Holding up: Energy, Communication Services, Utilities
- Lagging: Technology, Consumer Cyclical, Materials
Gold’s sharp reversal last week — down over 900 points from high to low — underscores how quickly positioning can unwind when rate expectations shift, especially following political headlines tied to Donald Trump and his announcement of Kevin Warsh as the next Fed Chair nominee.
Bottom Line
→ Manufacturing remains weak, but services and labor still drive the macro narrative
→ ADP and ISM Services set the tone mid-week
→ Friday’s NFP is the true volatility trigger
→ Markets are selective, not broadly risk-on
This is a week for confirmation, not conviction. Let the data do the talking.