Soft landing: is it still possible?

US stock rallied on Friday

Last Friday has been a positive day for Wall Street.

All three major US stock indexes have closed the market session at profit.

The S&P 500 closed at +2.28%, the Nasdaq ended the trading session at +2.56% and the Dow Jones closed at +2.13%.

The positive movement has been driven by the latest US employment report.

Soft landing: is it still possible?

On Friday, 7 January have been released the latest employment data which have shown that the economy added more jobs than analysts had predicted in December but with weaker growth in employee wages.

Investors have celebrated the latest report because they now believe that the Federal Reserve can ease the aggressive interest rate hikes.

After the job report, there is less fear of a wage-price spiral, this event takes place when employees ask for a pay rise in response to the high prices, and since they have more money in their pockets inflation can grow. This is exactly what the Federal Reserve is trying to avoid.

The soft landing can still take place, according to the latest job data, because the Fed's monetary policy to fight inflation is working fine without going into a recession.

Sentiment Indicator - Fear & Greed Index

The market sentiment is at 47 in the "Neutral" mode which is higher than a week ago when it was in "Fear" mode.

FedWatch Tool - FED rates probabilities

78.2% of investors are expecting the FED to increase the interest rates by 0.25% at the next meeting.

The remaining 21.8% are expecting a 0.50% rate increase.

The number of investors expecting a rate increase of 0.50% is getting lower compared to last week.

No other options are considered at this time.

The next FED meeting is on 1 February 2023.

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