Dow Jones shows indecision ahead of key weak

The Dow Jones index traded flat during the US session Monday, unable to move much ahead of this week’s critical macro events.

Data indicating stronger-than-anticipated US economic growth helped stocks end the week solidly higher.

The S&P 500 increased by 2.5%, the Dow Jones Industrial Average by 1.8%, and the technology-heavy Nasdaq Composite by more than 4% during the course of the week. Therefore, indices were poised for some profit-taking today.

US labor market in focus

Next week, the U.S. job market will be in the headlines. On Wednesday, the Department of Labor will issue the Job Opportunities and Labor Turnover Survey (JOLTS) report for December, which tracks job openings, hires, quits, and separations over the previous month. ADP will also release its National Employment Report for January, which will measure the rise of private sector payrolls.

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This will set the setting for Friday’s nonfarm payrolls data from the Labor Department. Economists anticipate that the US economy added 185,000 jobs in January, a deceleration from the 223,000 jobs added in December and the lowest increase since the loss of 306,000 jobs in December of 2020. The unemployment rate is anticipated to rise to 3.6% from its current multi-decade low of 3.5%.

All eyes are on Fed

Federal Reserve officials will assemble on Tuesday for a two-day meeting of the Federal Open Market Committee (FOMC), which will conclude on Wednesday with an interest rate announcement. According to fed funds futures data compiled by CME Group, traders expect the Fed to raise interest rates by 0.25%, placing the benchmark federal funds rate between 4.5 and 4.75%.

“The FOMC’s work is not yet done, even if the recent declines in inflation and wage growth give it more time to assess the effects of past policy actions. A key challenge for the FOMC will be to execute its transition to smaller rate hikes without furthering expectations that an end to its hiking cycle is imminent,” the team at Barclays wrote.

Technically speaking, the Dow Jones index trades below previous highs, forming a consolidation flag pattern. In this case, it should be a bullish formation. Thus, after a break above the upper line near $34,250, the bull market could be confirmed, likely dragging the price above $35,000.