Market recap: the last 24 hours

With U.S. cash equity and Treasury markets closed over the weekend, the past 24 hours were quiet domestically. Activity was concentrated in futures, FX, and crypto, where participation and liquidity are typically thinner. The tone heading into the new week is cautious rather than directional, with investors preparing for a dense macro calendar that will update growth, inflation, and labor-market trajectories.

Equities

Positioning appears balanced between soft-landing optimism and concern that sticky wage dynamics could complicate the disinflation path. Ongoing fourth-quarter earnings remain a major micro driver: leadership concentration in mega-cap growth versus cyclicals is under scrutiny, while small-cap sensitivity to real yields remains a theme. Expect sector dispersion around margins (input costs, pricing power) and guidance on 2026 capex and AI-related spend.

Rates

The Treasury curve enters the week focused on two catalysts: the near-term labor data (for policy path implications) and the U.S. Treasury’s quarterly refunding details (for term premium and supply dynamics). The front end is most sensitive to Friday’s wage growth and participation data; the long end will key off issuance composition and any signal about the pace of balance-sheet runoff versus bill issuance.

Dollar and commodities

The dollar’s near-term direction remains tethered to relative growth and rate differentials. A firmer U.S. labor print tends to support the dollar via higher front-end yields; a downside surprise would do the opposite. Energy and metals are trading a tug-of-war between global growth signals and geopolitics on the one hand, and higher real yields on the other. Gold’s bid is most sensitive to real-rate expectations and any pickup in tail-risk hedging demand into Friday’s data.

Credit

Investment-grade and high-yield spreads have been rangebound, underpinned by resilient cash balances and manageable near-term maturities. Primary issuance is likely to accelerate as earnings blackout windows lift. Any shift in funding costs via refunding details or a large move in rates could modestly reprice risk premia.

Macro developments and themes

  • No major scheduled U.S. data were released over the weekend. Market attention is squarely on the first full week of the month, which typically brings the most consequential macro updates.
  • Policy expectations hinge on the interaction between labor-market cooling and inflation progress. A slower but still expanding jobs backdrop is consistent with a gradual easing bias; an upside wage surprise would argue for patience.
  • Liquidity and flows may be influenced by start-of-month rebalancing and ongoing earnings-related positioning shifts.

The 7-day outlook: what to watch and why it matters

Monday

  • ISM Manufacturing PMI and S&P Global final PMIs: Fresh read on factory activity, new orders, and prices paid. The prices-paid subindex is particularly important for near-term inflation momentum.
  • Construction Spending: Illuminates the split between residential resilience and nonresidential trends; feeds GDP tracking estimates.

Tuesday

  • JOLTS Job Openings: Offers a lens on labor-market tightness via openings and quits. A continued glide lower in openings-to-unemployed ratio supports disinflation in services ex-housing.
  • Earnings highlights: Another heavy day for results and guidance; watch for commentary on demand elasticity, cost discipline, and AI monetization timelines.

Wednesday

  • ADP Employment: An early (imperfect) read on private payroll trends and wage growth by sector. Not a one-to-one predictor of nonfarm payrolls but can inform bias.
  • ISM Services PMI: Critical for the “last mile” of disinflation, as services prices are most wage-sensitive. New orders and employment subindices set the tone into Friday.
  • U.S. Treasury Quarterly Refunding Announcement (QRA): The composition between bills and coupons, and any guidance on issuance paths, can move the long end via term premium. A tilt toward bills typically eases pressure on duration; heavier coupon issuance does the opposite.

Thursday

  • Initial Jobless Claims: High-frequency check on labor-market slack. Sustained sub-trend claims reinforce a soft-landing narrative; a turn higher would flag cooling momentum.
  • Productivity and Unit Labor Costs: Key for the inflation outlook. Strong productivity with contained unit labor costs supports disinflation without growth damage.
  • Corporate issuance and earnings: Watch for supply–demand balance in IG/HY and any guidance shifts as management teams digest early-week macro signals.

Friday

  • Nonfarm Payrolls: The marquee report. Focus on headline jobs growth, revisions, and sector breadth.
  • Unemployment Rate and Participation: An uptick driven by higher participation is less inflationary than one driven by job losses.
  • Average Hourly Earnings: The pivotal metric for the policy path. A moderating 3–4% annualized wage pace aligns with 2–2.5% core inflation over time; reacceleration would argue for a slower easing cadence.

Weekend and beyond

  • Earnings spillover: Guidance revisions and capital-return plans (buybacks/dividends) can reshape factor leadership into mid-February.
  • Policy communication: Post-data remarks from policymakers will be parsed for reaction function clues.

Potential market paths and implications

If labor data are hotter than expected

  • Rates: Front-end yields likely drift higher on firmer wage pressures; curve could bear-flatten if long-end is anchored by refunding composition.
  • FX: Dollar support via wider rate differentials.
  • Equities: Multiple compression risk for duration-sensitive growth; cyclical value may outperform if growth impulse dominates inflation concern.
  • Credit: Spreads resilient if growth narrative prevails; funding costs modestly higher.

If labor data are cooler than expected

  • Rates: Bull-steepening favored as easing odds are pulled forward.
  • FX: Softer dollar as front-end reprices lower.
  • Equities: Relief rally in duration segments; quality leadership persists as earnings visibility remains king.
  • Credit: Supportive for carry strategies; watch for increased primary issuance to meet demand.

Key cross-currents to monitor

  • Refunding and term premium: Issuance skew can overshadow data for the long end; a bill-heavy mix eases duration pressure.
  • Services inflation dynamics: ISM prices-paid and wage metrics are the “last mile” constraint; benign readings increase confidence in disinflation durability.
  • Earnings quality: Breadth of positive revisions versus top-heavy leadership will shape risk appetite and dispersion.
  • Liquidity: Start-of-month flows can amplify moves around data prints; mind gap risk into Friday.

Practical takeaways for the week

  • Expect headline sensitivity to Wednesday–Friday data; volatility can cluster around ISM Services and the jobs report.
  • Watch the QRA for duration supply signals; it can independently move 10s/30s regardless of macro prints.
  • In equities, guidance beats may matter more than backward-looking EPS as investors price 2026 margins and capex.
  • For multi-asset context, the interplay between wages and services prices is the fulcrum for the policy path and, by extension, the dollar and long-duration assets.