Market snapshot over the last 24 hours

With U.S. cash markets closed for the weekend, the past 24 hours were quiet in terms of new macroeconomic releases and price-discovering flow. Investors remain focused on three pillars heading into the first full trading week of February: the policy path after the late-January Federal Reserve meeting, the growth–inflation mix as fresh activity data arrive, and fourth-quarter earnings season, which continues to shape sector leadership and index-level dispersion.

Policy and rates narrative

Markets are transitioning from a “when and how fast” debate on policy easing to a “how much” debate. The contours of that discussion are likely to be driven by incoming data on activity (manufacturing, services, jobs) and any recalibration in Fed communications now that the post-meeting blackout has ended. Term premia, refunding supply, and liquidity dynamics at the start of a new month are secondary but important drivers to watch in Treasuries.

Growth and inflation narrative

Core disinflation progress, resilient real activity, and a labor market that has cooled from peak tightness without cracking continue to anchor the soft-landing narrative. The early-February data run will test its durability: if activity firms while price pressures stay contained, the market can sustain a gradual-easing path; if activity softens markedly or wage growth re-accelerates, the policy path will be repriced.

Equities and earnings

Earnings season remains the near-term swing factor for equities. Guidance on 2026 revenue trajectories, operating leverage, and capital-return plans is in focus, as are margin drivers: input costs, price elasticity, and productivity gains from automation and AI. Style and sector rotations hinge on whether incoming data favor a growth-reacceleration (cyclicals, small/mid caps, value) or renewed slowdown (defensives, duration-sensitive growth) narrative.

Credit and funding

Credit markets head into February with solid primary calendars typical for the start of a month. Issuers will attempt to front-load supply before Friday’s employment report. Demand dynamics will reflect ongoing search for carry versus caution around late-cycle risks.

Dollar and commodities

The dollar’s near-term path remains tied to relative growth and rates differentials. Oil is sensitive to global growth expectations and any geopolitical disruptions, while metals remain a proxy for manufacturing momentum and the capex outlook.

Seven-day outlook (Feb 1–7, 2026)

The first week of a new month is data-heavy. The following releases and events are typically scheduled and closely watched; exact timings can vary, but the themes below outline how markets are likely to react.

Key data and events to watch

  • Monday (Feb 2): ISM Manufacturing PMI — A move above/below the 50 expansion line is pivotal for cyclical sentiment. Subcomponents to watch:
    • New orders: forward signal for production and capex.
    • Prices paid: early read on goods inflation impulse.
    • Employment: leading indicator for factory payrolls.
  • Tuesday (Feb 3): JOLTS Job Openings — Openings-to-unemployment ratio and quits rate inform wage pressure and labor-market tightness.
  • Wednesday (Feb 4): ADP Employment; ISM Services PMI — Services activity drives the bulk of the economy and tends to track labor demand. Prices paid in services is a key input for core inflation trajectories.
  • Wednesday (Feb 4): U.S. Treasury quarterly refunding details — Auction sizes, bill issuance mix, and terming-out strategy affect duration supply, term premia, and the yield curve.
  • Thursday (Feb 5): Initial Jobless Claims; Productivity & Unit Labor Costs (Q4) — Productivity strength can offset wage growth in unit labor costs, easing margin pressure and inflation risk.
  • Friday (Feb 6): Nonfarm Payrolls (January), Unemployment Rate, Average Hourly Earnings — The marquee release. Markets will focus on:
    • Payroll headline vs. revisions: revisions have often been as consequential as the print.
    • Unemployment rate and participation: slack dynamics.
    • Average hourly earnings and workweek: wage inflation and growth nowcast.
  • All week: Fed speakers — Post-meeting commentary can refine market expectations for the timing and magnitude of policy easing.
  • All week: Earnings season — Sector-level guidance on 2026 demand, inventories, and pricing will drive dispersion.

Scenario map for the week

  • Soft-landing supportive (probable market-friendly): ISM Manufacturing near/below 50 but improving, ISM Services solid, payrolls in a moderate range with stable unemployment, wage growth cooling toward pre-pandemic norms. Likely outcomes:
    • Equities: breadth improves; cyclicals and quality factor outperform.
    • Rates: modest bear-steepening as growth expectations firm; front-end anchored by gradual-easing pricing.
    • USD: mixed-to-softer against pro-cyclical FX; commodities supported.
  • Growth re-acceleration (hawkish skew): Strong ISM and hot wages. Likely outcomes:
    • Rates: bear-flattening led by front-end as rate cuts are pushed out.
    • Equities: rotation to cyclicals/value; long-duration growth under pressure.
    • USD: firmer on wider rate differentials.
  • Growth downshift (dovish skew): Weak ISM and soft payrolls. Likely outcomes:
    • Rates: bull-steepening as growth premium fades, easing priced sooner.
    • Equities: defensives, mega-cap quality leadership; higher volatility.
    • Credit: primary issuance pauses; spreads drift wider on risk-off tone.

Tactical considerations

  • Equities: Maintain flexibility for rapid rotations. Watch earnings beats driven by revenue vs. cost control—multiple expansion tends to reward the former more sustainably.
  • Rates: Early-month supply and coupon/cash flows can create short-term curve dislocations; Wednesday’s refunding details are a catalyst for term premia moves.
  • Credit: New-issue concessions may widen mid-week if data risk tempers demand; secondary liquidity often thins around Friday’s jobs report.
  • FX: Data asymmetry matters—services prices and wages typically move the dollar more than manufacturing.
  • Commodities: Oil reacts to growth and geopolitics; services strength without wage heat is the “goldilocks” condition for industrial metals.

Risks and wildcards

  • Data revisions: Benchmark and seasonal revisions can materially alter prior narratives, especially in payrolls and productivity.
  • Policy communication: A firmer or softer tone from Fed speakers relative to market pricing can reprice the front end quickly.
  • Supply dynamics: Any shift in Treasury’s bill-versus-coupon mix could steepen or flatten the curve beyond data effects.
  • Geopolitical developments: Sudden shifts can affect energy prices, inflation expectations, and risk sentiment.

What to watch inside the data

  • ISM Manufacturing: Supplier deliveries (tightening implies potential price pressure), inventories (draws can foreshadow production upticks), and export orders (global demand pulse).
  • ISM Services: Business activity vs. new orders gap (momentum), and prices paid (core inflation proxy).
  • Labor market: Average hourly earnings three-month annualized pace, diffusion index across industries, and labor force participation—especially prime-age participation—for clues on wage normalization.
  • Productivity and unit labor costs: Sustained productivity gains can reconcile solid growth with disinflation, supporting margins and a lower neutral policy rate.

Positioning and sentiment checklists

  • Equities: Watch skew and implied volatility into Friday—jobs-day option dynamics can amplify moves. Breadth indicators will signal whether leadership is broadening.
  • Rates: Front-end rate expectations versus Fed guidance—gaps tend to close around major data and Fed speeches.
  • Credit: High-yield versus investment-grade spread beta to equities around earnings misses; loan fund flows as a gauge of risk appetite.
  • FX: Dollar sensitivity is higher to services inflation and wages than to manufacturing softness; cross-asset confirmation from yields is key.

Bottom line

The weekend brought little new information, but the upcoming week is dense with catalysts that will reset views on growth, inflation, and the policy path. Manufacturing and services data will set the tone, refunding details will inform the rates supply narrative, and Friday’s jobs report will be the decisive driver for cross-asset performance. Expect tactical volatility around prints, with the prevailing trend hinging on whether the soft-landing narrative continues to hold.