Stocks, Fed face the challenge of a bullish jobs market

When Federal Reserve Chairman Jerome Powell told the world in November that lower interest rates were coming, investors rejoiced.

The Fed's campaign to beat down inflation had pushed interest rates higher and weighed on the costs of U.S. debt (and debts of nations around the world) and severely dampened housing markets.

There was euphoric talk the central bank could cut rates three or four times in 2024. Some thought six times.

But those giddy days are no more. A March cut won't happen. A rate cut in May isn't in the offing, either.

Why not cut now? Because Fed officials insist they want REAL DATA showing that inflation is at or near 2% and will stay there. (Sustainable is the word they use.)

The jobs report will command attention

And now a discrete event looms this week that could give the Fed more time to wait.

The U.S. Labor Department will report on the jobs market and on unemployment on Friday.

Related: Fed Inflation gauge ticks higher in January, but headline pressures ease; Stocks jump

A hot report (defined as, say, 350,000 jobs added -- the number estimated for January) and little change in the unemployment rate from January's 3.7% in January will confirm the Fed won't do any rate cutting at its March 19-20 meeting.

And probably not at its April 30-May 1 meeting, either.

After that, who knows? June? Maybe. July possibly.

One economist, Apollo's Torsten Slok, thinks the Fed may not need to cut rates AT ALL in 2024.

A giddy market still rolls on

So far, investors haven't cared. The merry stock-market rally that erupted at the end of October is still going strong. Stocks ended February higher for a fourth straight month.

The Standard & Poor's 500 index, the Nasdaq Composite Index and the Nasdaq-100 index all hit record closes on Friday. The Dow Jones industrials ended just 1% below its Feb. 23 record close.

The S&P 500, which finished at 5,137.08 on Friday (its first close above 5,100), has risen 16 weeks in the last 18 weeks. The performance is the best in 50 years, FactSet says.

More Economy:

Fed members just hat-tipped what's next for interest ratesRetail sales tumble clouds impact of inflation dataJobs report shocker: 353,000 hires crush forecasts, stokes inflation fears

Eight of the S&P 500's 11 sectors are higher this year, with the best performances from communications services and technology.

Analysts keep raising their year-end targets for the index: Bank of America analysts seem to have the highest projection at 5,600. That implies a 17% gain on the year, on top of a 24% gain in 2023.

The Nasdaq-100 Index, up 7.8% this year, has climbed nearly 30% from its October closing low.

Nvidia (NVDA) was up 29% for February. Super Micro Computer (SMCI) jumped nearly 64% for the month and another 4.5% on Friday.

Bitcoin shoots higher

Bitcoin jumped nearly 46% in February after a lackluster January and ended Friday at $63,053, just 8.6% below its intraday peak of $68,991 in November 2021.

One reason for the sharp gain is you now can invest in bitcoin via exchange-traded funds (ETFs) offered by a host of money managers.

A number of bitcoin players see the crypto currency hitting $100,000 soon.

The 2-year Treasury yield is off 1.6% on the year at 4.19%.

How long will the rally last?

Still, the 10-year Treasury yield is up 8% this year. A 30-year mortgage will cost you about 7.1%, up from a low of 6.6% in December.

No wonder that the National Association of Realtors reported that pending home sales slumped 5% in January.

A construction worker works on roof trusses for a new home.Shutterstock

And there are still reports of layoffs in technology companies and there's persistent chatter from prominent people like Jamie Dimon of JP Morgan Chase (JPM) , that a recession is coming.

Oil and gasoline prices are rising (maybe because of normal season trends).

Given how this market is performing, a recession and a market pullback need a strong and specific trigger.

The political environment may offer one. So, too, could a widening of the Russia-Ukraine War or the Hamas-Israeli war or a Chinese attack on Taiwan.

A true wildcard: something bizarre out of North Korea.

Costco, Target, Broadcom earnings are on tap

All the optimism about stocks notwithstanding, the jobs report is, in fact, the dominant report of the week. Until then, market reaction to others due before Friday will probably be muted. The reports include:

Factory orders and the ISM Non-manufacturing on Monday. Factory orders on Tuesday. The weekly Freddie Mac mortgage survey on Wednesday.Jobless claims on Thursday.

Related: S&P adds two hot stocks to its flagship S&P 500 index

There are some important earnings reports due in the week ahead, including

Tuesday: Crowdstrike (CRWD) , Target TGT, Ross Stores (ROST) and Nordstrom (JWN) . Wednesday: Beverage maker Brown Forman (BF.A) and (BF.B) , Campbell Soup (CPB) , and Abercrombie & Fitch (ANF) , whose shares have been hitting new highs regularly for the last year. Thursday: Chipmaker Broadcom (AVGO) , Costco Wholesale (COST) , grocery giant Kroger (KR) and electronic signature company DocuSign (DOCU) .

Costco, Target and Kroger (if only because it's trying to merge with Albertson's) offer the most potential for drama.

Related: Veteran fund manager picks favorite stocks for 2024