Fed holding pattern to persist, unless jobs data is spectacular or disastrous

US stocks rose slightly last week and last month as traders bet the Federal Reserve would hold off on interest-rate hikes for a few months. The holding pattern will persist this week, unless employment data on Friday is spectacular or disastrous.

US stock traders call the day of a central-bank policy announcement a "Fed day". This year has effectively been one long "Fed day". On the day of a Fed announcement like last Wednesday, shares typically bounce around in the morning, registering slight gains or losses, but generally staying still. Once the Fed statement hits the tape, you can almost hear traders revving their engines as the indices register big moves. It's off to the races, even if it often takes a couple of sessions for the results of the Fed rally (or Fed plunge) to be finalised.

Similarly, this year, major stock indices have gone nowhere. This is treading water on a grand scale. In 2008, the broad S&P moved by 5 per cent or more in 15 individual sessions. This year, the S&P 500 has never been more than 3 per cent above or below the level where it started the year. Volatility has come in the form of fleeting selloffs and rallies, which stop abruptly as soon as previous peaks and troughs are reached. And the rationale for the flat market this year is the exact same as that on a Fed day.