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We might need an addendum to the old adage that there are decades in which nothing happens and weeks in which decades happen. Apparently, there are also weeks where nobody knows what-in-the-you-know-what has happened... last week was one of them.

The Fed rate-hike deceleration slammed right into a Bureau of Labor jobs report so ludicrously and unexpectedly "positive" -- arguably proof of an economy still running white-hot -- it rocked everyone's baseline outlook. Now short-sellers are scrambling to cover while blue chip companies are expecting their first profit drop in years, and the only thing anyone is certain about is that there is no longer any such thing as certainty. In other words, happy Monday.

More Powell to You

The January jobs report saw 517,000 nonfarm jobs added, vs the 187,000 many expected, bringing the unemployment rate to 3.4%, its lowest level since 1969. Whether or not that's proof the economy is recovering is almost beside the point. For Jerome Powell, it's proof that the economy can sustain the future rate-hiking body blows that he continues to insist are still coming.

All that said, if there's one person in all this mess who can even pretend to know what they're doing, it's Powell himself. Navigating the uncharted route to a soft landing, in which inflation cools without flatlining the overall economy, does not come without its fair share of backseat drivers. Practically half of Wall Street thinks his rate hikes have cribbed progress, while the other half contends that scaling down hikes too soon could ultimately land the economy in 70s-style stagflation. But some simple data suggests we may be headed in the right direction: since the start of the fourth quarter, the S&P 500 Index has climbed 15%, close enough to catch the sweet whiff of a bull running after a 20% climb.

The result? An outbreak of Wall Street head-scratching and nothing close to a consensus:

  • Companies on the S&P 500 are projected to see a year-over-year fall in profits of over 5%, according to FactSet data, the biggest dropoff since Q3 2020. FactSet's senior analyst John Butters tells the Financial Times that companies are on track for their worst performance against expectations since 2008. Yikes.
  • And yet, the market is strong enough to stomp short-selling firms as the market steadfastly rallies. The suddenly glass-half-full crowd just executed its largest burst of short coverings since November 2015, the FT reports.

Summer Time: At least one prominent bear has grown cautiously optimistic. Lawrence Summers, who once spoke in apocalyptic terms about the macroeconomic landscape, took a different tone in a chat with CNN's Fareed Zakaria this weekend: "I'd say I'm encouraged, but I still think it would be a mistake to say we're out of the woods." Like a lost hiker, he'll just have to keep blowing that whistle.