Stock-market investors fear ‘no-landing’ economy could spell trouble. What’s next.
==========

Stock investors fear a 'no-landing' economy could spell trouble for the U.S. stock market. The possibility of a 'no landing' scenario, where the economy remains strong while inflation stays on target, has raised concerns among investors. If inflation reaccelerates, the Federal Reserve may be hesitant to cut its policy interest rate, which could spell trouble for stocks. The past week saw strong tech earnings and a blowout jobs report, leading to record highs for U.S. stocks. However, Fed Chair Jerome Powell's comments during the week indicated that the central bank may not start cutting its key interest rate in March. Former Fed vice chairman Roger Ferguson referred to this scenario as the risk of 'no landing.' Traders have adjusted their expectations, with a lower likelihood of a rate cut in March and a higher likelihood in May. The blowout jobs report further eliminates the chance of a rate cut in March. The U.S. economy added 353,000 new jobs in January, exceeding expectations. Earnings reports have also been positive, with 68% of S&P 500 companies beating estimates. However, tech companies' guidance has not been as strong, and concerns around regional banks have resurfaced. New York Community Bancorp's stock triggered a drop in regional bank stocks after posting a surprise loss and signaling challenges in the commercial real estate sector. The Fed's bank term funding program is set to end in March, which has added to the headwinds for regional banks. Investors are advised to go risk-off before May, with a preference for U.S. Treasuries with a tenor of four years or shorter. For stocks, the healthcare, utilities, consumer staples, and energy sectors are favored. Some investors remain optimistic, citing the slowdown in inflation and strong economic data and earnings. In the week ahead, investors will be watching the ISM services sector data, the U.S. trade deficit, and weekly initial jobless benefit claims numbers. Several Fed officials will also speak, providing more clues on the possible trajectory of rate cuts.

#StockMarket #Economy #Inflation #InterestRates #FederalReserve #Investors

https://www.marketwatch.com/story/stock-market-investors-fear-no-landing-economy-could-spell-trouble-whats-next-013329b7