Stocks Up On Fed Minutes, Focus Turns To Friday's Employment Report  Image: Bigstock Stocks closed higher yesterday with most of the indexes erasing Tuesday's loss. The markets were up for most of the day prior to the release of the FOMC Minutes (from December's Fed meeting). There was some volatility afterwards, but ultimately, they rallied into the close. There were no real surprises in the minutes either. It showed the members were unanimous in the decision to slow the pace of rate hikes. But they kept open the possibility of raising the terminal rate even higher than the forecasted 5.1%. It was also clear that nobody anticipated a rate cut this year either. With the Fed Funds rate at a midpoint of 4.38%, they would only need to raise rates by 25 basis points for each of the next three meetings to get to 5.1%. The next meeting ends on Feb. 1, and the expectation is for the Fed to raise rates by just 25 basis points, rather than the 50 bps they raised in Dec. Some caution was expressed to not raise rates to a level more restrictive than necessary. But that's why they adopted a slower pace to begin with, as that would give them time to assess how their rate hikes were impacting inflation and the economy, given the lagged effects of the hikes. All in all, it was a fine report. And it pretty much mirrored what Fed Chair, Jerome Powell, shared in December. In other news, yesterday's MBA Mortgage Applications were down by -10.3% w/w, with purchases down -12.0%, and refi's down -4.4%. (Last week was definitely skewed by the holidays.) The ISM Manufacturing Index came in better than expected at 48.4 vs. the consensus for 48.1, although it was down vs. last month's 49.0. And the Job Openings and Labor Turnover Survey (JOLTS) report showed there were 10.458 million job openings for November vs. views for 10.1M, and last month's upwardly revised 10.512M. But the jobs report everyone is really waiting for is Friday's Employment Situation report. Until then, today's docket includes Motor Vehicles Sales, the International Trade in Goods and Services report, the PMI Composite report, Weekly Jobless Claims, the Challenger Job-Cut report, and the ADP Employment report. But again, the main jobs report is on Friday. In spite of a challenging 2022, and challenges ahead, there's also plenty to be optimistic about, not the least of which is the favorable seasonal tendency, i.e., the 4-year Presidential Cycle, which shows that year 3 (that's 2023), is the best year of all 4 years. In fact, since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%. And that has plenty of people excited for 2023. But don't expect a cakewalk.
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