Aurelia Butler

NEW YORK (Reuters) – Investors will closely watch next week’s inflation numbers and Federal Reserve meeting for clues on whether the soft landing hopes that drove stocks to record highs are still justified. This year’s rally has lifted the S&P 500 up more than 12% year-to-date, on expectations the Fed can cool inflation without hurting growth. Yet recent economic data have sent conflicting signals: U.S. employment numbers released Friday were far stronger than expected, while earlier reports showed a slowdown in manufacturing and a first-quarter growth rate revised lower. May inflation data, due next Wednesday, must walk a tightrope to satisfy expectations of a “Goldilocks economy”: satisfactory growth with prices under control. Later that day, investors will look to the Fed for signals on the central bank’s rate cut plans. “The market would like some clarity and not see the Fed have to wait until December or January to begin cutting rates,” said Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, adding a long period of elevated borrowing costs could hurt the economy.Nonfarm payrolls increased by 272,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said on Friday, exceeding 185,000 jobs forecast by economists in a Reuters poll. After the data, futures markets showed investors trimming expectations for rate cuts, with chances of a September cut falling to about 55% from about 70% before the report. Strong employment data countered earlier reports suggesting the economy was cooling, including a June 3 release showing U.S. manufacturing activity in May slowed for a second straight month.Despite the S&P 500’s march to new records, some investors worry the gains have concentrated in a few giant technology and growth names such as Nvidia (NASDAQ:NVDA), with the rest of the rest of the market far more tepid. U.S. stock valuations remain well above historic norms, noted Ed Clissold, chief U.S. strategist at Ned Davis Research. The median price to earnings ratio of the S&P 500 would need to fall 31% to hit its long-term median, and 19% to reach its 20-year norm, he said. “People are concerned about how far and how high this market has risen and how narrow it has been,” said Raul Diaz, senior investment officer at Northern Trust (NASDAQ:NTRS) Wealth Management.Plenty of investors believe strong corporate results and a relatively benign macroeconomic environment can keep supporting stocks. First quarter earnings came in about 8.1% above analyst expectations, according to LSEG data. “We believe U.S. stocks are likely to remain supported by favorable macro conditions, healthy earnings growth, AI tailwinds, and the potential for a Fed pivot before year-end,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, in a note this week. The bank recently upgraded its year-end S&P 500 target to 5,500, up 3% from where the index trades today. Others believe political uncertainty, not economic data, will cause turbulence later this year. The first debate between President Joe Biden, a Democrat, and Republican challenger and former president Donald Trump will take place June 27, nearly three months earlier than the Sept. 16 date suggested by the nonpartisan Commission on Presidential Debates, which has managed them since 1988. That could turn the market’s attention to the 2024 presidential election earlier in the year than usual, said Grace Lee, senior portfolio manager at Columbia Threadneedle Investments. “The market still on the surface looks like everything is fine, but I think there’s a certain nervousness that may not even be about the economic data,” said Lee. “People want to stick to what has been working and not go too far out on a limb into other areas that might see political ramifications, whether it’s healthcare and drug prices or clean energy.” More

The topsy-turvy economic environment of the COVID-19 pandemic sidelined those differences, turning Federal Reserve officials at first universally dovish as they sought to provide massive accommodation for a cratering U.S. economy, and then, when inflation surged, into hawks who uniformly backed aggressive interest rate hikes.The risks are now seen as more balanced and the choices more nuanced.The following chart shows officials’ latest views on the outlook for Fed policy and the economy. The designations are based on comments and published remarks; for more on the thinking that shaped these hawk-dove designations, click on the photos in this graphic. For a breakdown of how Reuters’ counts in each category have changed, please scroll to the bottom of this story. Dove Dovish Centrist Hawkish Hawk   Patrick Jerome Powell, Raphael Bostic, Michelle Harker, Fed Chair, Atlanta Fed Bowman, Philadelphia permanent President, 2024 Governor, Fed President, voter: “I don’t voter: Now permanent 2026 voter: think that it is expects one voter: “I When it comes likely based on rate cut this remain to a rate cut, the data we have year, in the willing to “I think we’re that the next fourth quarter, raise the close, give us move that we down from two federal a couple of make will be a previously funds rate meetings.” Feb rate hike … It (April 3, at a 22, 2024 is more likely 2024). “If future … we hold the September is meeting policy rate the right time, should the where it is …” then it’s going incoming May 14, 2024 to be data September. If indicate it’s December, that that’s the progress right time, on that’s going to inflation be December. If has it’s February stalled or that’s the reversed.” right time, May 17, it’ll be 2024 February.” May 30, 2024   John Williams, Loretta Mester,   New York Fed Cleveland Fed President, President, 2024 permanent voter: voter*: “I Three rate cuts would not think in 2024 is “a that that’s reasonable kind still of starting appropriate,” point.” (Feb 28, in reference to 2024) “I don’t her previous feel any expectation for urgency” to three rate cuts lower rates.” in 2024 (May May 30, 2024 20, 2024). “I need to see a few more months of inflation data that looks like it is coming down.” May 21, 2024     Philip Thomas Barkin,   Jefferson, Vice Richmond Fed Chair: “It is President, 2024 too early to voter: Lower tell whether the consumer recent slowdown inflation in in the April was disinflationary “good, but process will be still not where long-lasting.” we are trying May 20, 2024 to get.” May 16, 2024     Michael Barr, Jeffrey Schmid,   Vice Chair of Kansas City Fed Supervision, President, 2025 permanent voter: voter: “I am “We will need to prepared to be allow our patient.” May restrictive 14, 2024 policy some further time to continue its work.” May 20, 2024     Christopher Neel Kashkari,   Waller, Minneapolis Fed Governor, President, 2026 permanent voter: voter: Penciled “In the absence in two 2024 of a significant rate cuts in weakening in the March. “Many labor market, I more months of need to see positive several more inflation data, months of good I think, to inflation data give me before I would confidence that be comfortable it’s supporting an appropriate to easing in the dial back.” May stance of 28, 2024 monetary policy.” May 21, 2024.     Lisa Cook, Lorie Logan,   Governor, Dallas Fed permanent voter: President, 2026 “Fully restoring voter: “I think price stability it’s too soon may take a to really be cautious thinking about approach to rate cuts.” May easing monetary 30, 2024 policy over time.” March 25, 2024 Adriana Kugler, Governor, permanent voter: “If disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate.” April 3, 2024     Mary Daly, San     Francisco Fed President, 2024 voter: Three rate cuts this year is “a very reasonable baseline.” (April 2, 2024) “I’m in a wait-and-see mode.” May 9, 2024.     Austan Goolsbee,     Chicago Fed President, 2025 voter: At the median Fed expectation for three rate cuts in 2024 (March 25, 2024). “What everybody is trying to wrap their head around now … is are we back to the traditional tradeoff between employment and inflation?” May 30, 2024     Susan Collins,     Boston Fed President, 2025 voter: Expects “in the range of two” rate cuts for 2024 (April 11, 2024) “We’re in a period when patience really matters.” May 21, 2024 *Mester hits the Fed banks’ mandatory retirement age in June; if a new Cleveland Fed president is not in place by the Fed’s July 30-31 meeting, Chicago Fed President Goolsbee would vote until one is. Notes: Fed policymakers began raising interest rates in March 2022 to bring down high inflation. Their most recent policy rate hike, to a range of 5.25%-5.50%, occurred in July 2023. Half of the policymakers as of mid-March thought three rate cuts this year would be appropriate; just as many thought it would be fewer, projections released after their March 19-20 meeting showed. Two of 19 thought there would be none. Alberto Musalem, who started as the St. Louis Fed’s president on April 2, has not made any substantive policy remarks and is not included in the dove-hawk matrix. All 12 regional Fed presidents debate monetary policy at Federal Open Market Committee (FOMC) meetings that are held eight times a year, but only five cast votes at any given meeting, including the New York Fed president and four others who vote for one year at a time on a rotating schedule.The seven Fed governors, including the Fed chair and vice chairs, have permanent votes on the FOMC. Reuters over time has shifted policymaker designations based on fresh comments and developing circumstances. Below is a Reuters count of policymakers in each category, heading into recent Fed meetings. FOMC Date Dove Dovish Centrist Hawkish Hawk June ’24 0 1 10 6 1 Apr/May ’24 0 1 10 6 1 March ’24 0 1 11 5 1 Jan ’24 0 2 9 4 1 Dec ’23 0 2 9 4 1 Oct/Nov ’23 0 2 7 5 2 Sept ’23 0 4 3 6 3 June ’23 0 3 3 8 3 March ’23 0 2 3 10 2 Dec ’22 0 4 1 12 2 More

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OTTAWA (Reuters) -The Canadian economy added more jobs than expected in May and the jobless rate ticked up to 6.2%, data showed on Friday, as a continued increase in population offset the economy’s ability to absorb people coming into the labor market.The economy added a net 26,700 jobs, Statistics Canada said, more than the 22,500 job gain forecast by analysts in a Reuters poll. The unemployment rate ticked up to a 28-month high of 6.2% from 6.1% in April, matching forecasts. The jobless rate, on an uptrend over the past year, has risen 1.1 percentage points since April 2023, Statscan data showed.Economists had said that with no slowdown in population growth seen in the short-term, any job additions below 45,000 people would push the unemployment rate higher.Money markets, which had been betting for an over-50% chance of a rate cut in July, trimmed bets to 44% after the jobs data.The growth rate of wages accelerated to a four-month high, Statscan said.The average hourly wage growth for permanent employees accelerated to an annual rate of 5.2% from 4.8% in April, data showed. The wage growth rate – closely tracked by the Bank of Canada (BoC) because of its effect on inflation – was the highest since January’s 5.3% rate.The BoC had warned on Wednesday that if wage growth remains high it could slow progress on taming inflation, after it cut its key policy rate to 4.75% and indicated further easing would be gradual and dependent on data.The bank will have another month’s job data before its next rate decision announcement on July 24.The Canadian dollar was trading 0.3% lower at 1.3715 to the U.S. dollar, or 72.91 U.S. cents, as investors also weighed stronger-than-expected U.S. jobs data.The employment gains in May were driven by part-time work, which more than offset full-time positions lost in the month, the statistics agency said. It noted that the proportion of part-time workers who could not find a full-time job or who worked part-time due to poor business conditions was 18.2% in May, the highest since December 2021.In May, employment in the goods sector decreased by a net 20,700 jobs, mainly in construction, while the service sectors gained a net 47,400 positions, led by healthcare and social assistance as well as finance-related jobs. More