Today the Federal Reserve will wrap up its January policy meeting. At the moment, no changes to monetary policy seem likely. The Fed has previously stated that its stance will need to remain extremely dovish until inflation increases substantially and there are improvements in the US labor market.
Because fundamental reports from the United States have been less than ideal since the last Federal Reserve meeting, it is safe to assume that the economy is still very far from the central bank’s targets. Any hawkish statements during Jerome Powell’s press conference after the meeting’s conclusion will be extremely surprising.
Aside from the Federal Reserve meeting, the most important event on the economic calendar today is the report on durable goods orders in the United States. Earlier in the day Germany published the GfK consumer confidence projection for February, which was twice worse than the forecast at -15.6 against an expectation of -7.9. Recall that Germany will remain in a lockdown until February 14 at least.
On the stock market, video game retail GameStop continues to be in most headlines due to recent developments which began on online messaging board Reddit. Users in the group r/WallStreetBets joined together to buy the heavily-shorted shares of GameStop, whose value as a company has declined over the past few years due to the rising popularity of digital retailers and dropped even more due to pandemic lockdowns.
Wall Street short-sellers and hedge fund managers then had to scramble due to the short-squeeze. GameStop shares have increased manifold and the company’s valuation went from just over $1 billion in 2020 to $20 billion today. Other companies targeted in the same way include Blackberry and AMC.
Meanwhile, US stock indices are still displaying a mixed performance. Dow Jones and S&P 500 were both down due to concerns over the pandemic and difficulties for President Biden to pass his ambitious stimulus bill. However, the tech-heavy Nasdaq 100 is set to gain today, in part due to a stellar performance from Microsoft, who released its latest earnings report yesterday.
Later we expect similar reports from other tech giants, most notably Apple, Facebook, and Tesla.
The Middle East is also once again making it to the headlines, this time due to a possible escalation in the strained relationship between Saudi Arabia and Iran. There were explosions in Riyadh yesterday and the United States is reportedly preparing to send more troops to the region. One of Biden’s biggest challenges as President will be to re-negotiate a deal with Iran after Trump abandoned the previous Obama-era agreement that used to secure the region.
