Marketmind: Fed games

By Stephen Culp

(Reuters) – A look at the day ahead in markets from Stephen Culp, New York stock market reporter.

Asian stocks are primed for a green Wednesday on the heels of a broad rally on Wall Street, as a slew of economic data suggested the Federal Reserve’s restrictive monetary policy is working as directed.

All three major U.S. stock indexes ended bright green and notched welcome gains for the month.

The tech-heavy Nasdaq posted its biggest January percentage advance in 22 years.

Risk appetite was largely fueled by economic data, specifically the Employment Cost Index (ECI) which decelerated in the fourth quarter to its slowest growth in a year – yet another sign that decades-high inflation is beginning to cool.

This is welcome news for the Fed, which is expected to punctuate its two-day monetary policy meeting on Wednesday with a 25 basis point hike to the Fed funds target rate, its latest salvo in its battle against inflation.

Upbeat quarterly results from a handful of major industrial firms, including Exxon Mobil Corp, United Parcel Service Inc and General Motors Co added muscle to the rally.

On Wednesday, market participants will digest factory and labor market data and parse the Fed’s statement and Chairman Jerome Powell’s remarks at the subsequent press conference.

Social media bellwether Meta Platforms Inc posts results after Wednesday’s bell as a prologue to Apple Inc, Amazon.com and Alphabet Inc, all slated for Thursday after the bell.

Crude prices advanced after EIA data showed solid U.S. energy demand.

Factory data from China showed the manufacturing sector entered expansion territory after Beijing relaxed its COVID-19 restrictions, further hinting at a global demand rebound.

(The race to raise rates https://www.reuters.com/graphics/CANADA-CENBANK/zjvqjebewpx/chart_eikon.jpg)

Here are some key developments that could provide more direction to markets on Tuesday:

– Japan posts manufacturing PMI (Jan)

– South Korea releases preliminary import/export data (Jan)

– S&P Global unveils Caixin manufacturing PMI for China (Jan)

– The U.S. economic reports include ISM PMI (Jan), JOLTS (Dec), ADP payrolls (Jan) and construction spending (Dec)

– The U.S. Federal Reserve issues its Fed funds target rate decision at 1400 GMT

(Reporting by Stephen Culp; Editing by Josie Kao)