For the next several sessions, US rates will take their cues from data and supply reception as Fed officials go silent ahead of the January policy meeting.

So far in 2024, Treasurys are lower, but YTD highs for bond yields didn’t derail equities. Indeed, the S&P notched a new record despite sharply higher front-end yields and some token pushback from policymakers on aggressive pricing for rate cuts.

As discussed at length in the latest Weekly, it was somewhat refreshing to see stocks move higher amid upbeat macro data: Maybe good news is good news again.

The macro highlight between now and this month’s FOMC meeting is the advance read on Q4 US GDP. Consensus expects 2% from the headline and 2.5% from the personal consumption component.

Atlanta Fed GDPNow stood at 2.4% as of January 19, for what it’s worth.

Although it’s tempting to suggest the “risk” is a hot read that prompts markets to further trim the odds of a March rate cut, it’s possible the focus will be on core PCE. Recall that the final read on Q3 GDP saw the core PCE print revised down to 2%.

“The interim data suggests a move below 2% is in the offing,” BMO’s Ian Lyngen and Ben Jeffery remarked, adding that while a one-handle on the quarterly figures wouldn’t constitute “a clear-cut indication that the Fed can claim victory,” it’d be “a step in the right direction.”

Personal income and spending data for December, as well as PCE price data for last month, will be released on January 26, the day after the GDP figures, ostensibly muting the impact of the monthly release. Still, market participants will be keen to assess the December numbers in light of the warm CPI print earlier this month and the very robust read on nominal spending from the retail sales report.

Consensus expects a 0.4% gain for personal spending. It’d be the ninth consecutive monthly advance.

How much any of this will move the needle for March Fed cut odds is debatable. Plainly, Jerome Powell’s messaging at the press conference on January 31 is the next major event with the potential to make or break bets on a Q1 rate reduction. The Fed will have several additional data points in hand by March that’ll easily outweigh anything on the docket this coming week.

For equities, there’s presumably a point beyond which fewer implied Fed cuts without an acceleration in earnings growth expectations will be negative but… well, suffice to say 2024’s a “so far, so good” story for stocks. Traders trimmed March rate-cut odds to ~40% last week and 2024 implied cuts by ~30bps and it didn’t matter for equities’ summit push.

Also on the US docket in the new week: New and pending home sales, flash prints on S&P Global’s PMIs for January and supply (twos, fives and sevens).

Overseas, the ECB will keep rates on hold with traders targeting April for the first cut, while the Bank of Japan likely won’t raise rates just yet. Although Kazuo Ueda will almost surely hike in 2024, the earthquake on January 1 probably took this month off the table for the first move.