Market recap: last 24 hours

U.S. macro and financial markets traded with a distinctly cautious tone into early Tuesday, with participants largely positioning around midweek policy and data catalysts. Price action across major asset classes was orderly and range-bound, reflecting a preference to trim risk rather than place directional bets ahead of the Federal Reserve’s policy decision and a dense end-of-month data slate.

Equities

U.S. equities were mixed-to-flat, with intraday leadership shifting as investors balanced steady earnings headlines against macro event risk. Rate-sensitive groups tended to mirror moves in Treasury yields, while defensives held up as investors favored balance-sheet quality. Trading volumes were moderate and breadth uneven, consistent with a market waiting for clearer policy and inflation signals.

Treasuries and money markets

Treasury yields hovered in a tight range and the curve saw only incremental moves, with front-end pricing anchored by near-term policy expectations and the long end more sensitive to term premium and supply dynamics. Fed funds and OIS curves implied only modest adjustments to the projected policy path over the next few meetings, underscoring the market’s focus on the wording of the Fed statement and chair’s press conference for guidance on the timing and pace of any future rate changes.

U.S. dollar and FX

The dollar traded narrowly versus major peers, reflecting subdued cross-asset volatility. FX positioning was driven more by relative policy expectations and end-of-month flows than by fresh macro surprises, with traders reluctant to press directional views before the central bank and inflation data updates.

Credit

Credit markets were stable. Investment-grade spreads were broadly unchanged, while high-yield risk appetite remained selective. The primary market window stayed open, though issuers were deliberate on timing around this week’s policy and data calendar. Investor demand continued to favor higher-quality balance sheets and shorter-duration risk.

Commodities

Crude prices oscillated within recent ranges as the market weighed geopolitical risk against signals on global demand. Precious metals were steady, with gold showing typical pre-event hedging interest as traders looked ahead to policy and inflation headlines.

Macro drivers in focus

  • Policy signaling: The precise tone of the Federal Reserve’s statement and press conference remains the week’s primary driver, particularly any nuance on the balance between inflation progress and growth risks, and how that shapes the trajectory of policy over the next few meetings.
  • Inflation momentum: Measures closest to the Fed’s preferred gauge—especially core PCE—are central for assessing whether disinflation is continuing at a pace consistent with eventual policy easing.
  • Labor cost dynamics: The Employment Cost Index is a key cross-check on wage-driven inflation pressure and will inform the durability of services disinflation.
  • Growth composition: The advance estimate of Q4 GDP will matter less for the headline rate and more for its underlying mix—consumption resilience, business investment, inventories, and the GDP price index.
  • Liquidity and supply: End-of-month flows, Treasury issuance patterns, and corporate supply timing can influence term premia and risk spreads, shaping cross-asset correlations.

Seven-day outlook: what to watch

Dates below reflect the U.S. calendar for the week beginning Tuesday, January 27, 2026.

  • Wednesday, Jan 28
    • Federal Reserve policy decision and press conference: Expect no new economic projections at the January meeting, placing extra weight on statement language and Q&A for clues on the bar for future rate changes, balance sheet runoff cadence, and any discussion of money market facility usage.
    • Treasury market: Watch for post-decision volatility in the front end, curve re-pricing on guidance, and shifts in rate cut timing implied by futures and OIS.
  • Thursday, Jan 29
    • Q4 Advance GDP (BEA): Focus on real final sales, consumer spending durability, business capex, and the GDP price index for fresh signals on underlying inflation.
    • Weekly jobless claims: While noisy, claims remain the timeliest read on labor market tightness and can modulate growth expectations at the margin.
  • Friday, Jan 30
    • Personal Income & Outlays (Dec): Core PCE price index and monthly consumption/income detail are pivotal for near-term inflation and demand trajectories.
    • Employment Cost Index (Q4): A critical check on wage growth momentum; persistent easing would reinforce the disinflation narrative, while an upside surprise could complicate the policy path.
    • Consumer sentiment (final Jan) and regional activity surveys: These help triangulate spending intentions and manufacturing momentum into early Q1.
  • Monday, Feb 2
    • ISM Manufacturing (Jan): New orders, employment, and prices paid sub-indices will shape views on goods-sector stabilization and cost pressures.
    • Construction spending (Dec): Offers color on residential and nonresidential trends into year-end.
  • Tuesday, Feb 3
    • Early-month releases: The first week of the month typically brings JOLTS and Factory Orders; both inform labor demand and durable goods momentum as markets pivot toward the following week’s employment report.

Potential market scenarios for the week

  • Base case: The Fed acknowledges progress on inflation while emphasizing data dependence and a desire for more confirmation. GDP and PCE point to steady disinflation with growth moderating but resilient. Markets lean toward a modestly risk-on tone with equities supported, the dollar range-bound, and the rates curve stabilizing as cut expectations coalesce around later in the year.
  • Hawkish risk: Stickier wage or inflation readings (ECI/PCE) and a firmer policy tone prompt a re-pricing toward a slower or later easing path. Front-end yields push higher, the curve potentially bear-flattens, the dollar firms, and growth-style equities underperform rate-sensitive peers.
  • Dovish risk: Softer inflation and cooling labor cost signals, alongside a patient Fed tone that downplays the risk of re-acceleration, pull forward easing expectations. Front-end yields decline, risk assets catch a bid, and the dollar softens, with credit spreads stable-to-tighter.

Cross-asset implications

  • Equities: Event risk favors balanced exposure. Earnings revisions and guidance around margins and demand will drive dispersion beneath the index level; quality and cash-flow resilience remain in favor amid policy uncertainty.
  • Rates: The front end is most sensitive to policy tone and inflation beats/misses. Watch the 2s10s slope for clues on growth versus policy re-pricing, and the term premium response to any supply or balance sheet commentary.
  • Credit: A steady macro path should keep IG demand firm; HY performance hinges on earnings quality and refinancing windows. New-issue concessions may vary around event days.
  • FX: The dollar’s path hinges on relative policy expectations and the inflation trajectory; a balanced Fed message and in-line PCE likely keep ranges intact into next week’s labor data.
  • Commodities: Oil remains tactically driven by geopolitical risk and demand revisions; gold is sensitive to real yields and any shift in rate cut timing implied by policy communications and inflation prints.

Key questions into next week

  • Does the Fed’s message materially shift the market-implied timeline for policy easing, and does that shift persist beyond the initial reaction?
  • Do ECI and core PCE corroborate a continued glide lower in underlying inflation, particularly in services ex-housing?
  • Is Q4 growth composition consistent with sustainable demand, or flattered by inventories and one-offs?
  • Do early-February manufacturing and labor demand indicators (ISM, JOLTS) signal stabilization or renewed softening?