| Federal Reserve officials ponder peak interest rates, the US starts to recover parts of a Chinese balloon and Credit Suisse delays bonuses. — Kristine Aquino Federal Reserve Bank of Atlanta President Raphael Bostic said January's strong jobs report raises the possibility that the central bank will need to increase interest rates to a higher peak than policy makers previously expected. If a stronger-than-expected economy persists, "It'll probably mean we have to do a little more work," said Bostic, who doesn't vote on policy this year. He reiterated his base case for rates to reach 5.1%, in line with the median of policymakers' December forecasts, and stay there throughout 2024. The US has started to recover some parts from the Chinese balloon that an American F-22 fighter jet shot down off the coast of South Carolina. Debris from the balloon and its payload scattered over a patch of Atlantic Ocean measuring about 1,500 meters by 1,500 meters. Asked whether the balloon uproar had weakened US-China relations, President Joe Biden told reporters Monday, "No. We've made it clear to China what we're going to do. They understand our position. We're not going to back off. We did the right thing. And there's not a question of weakening or strengthening. It's just reality." Meanwhile, China's foreign ministry repeated the assertion that the balloon that passed over US territory last week was an "isolated incident."  | Credit Suisse is delaying a much-anticipated compensation day for some of its bankers, who are mainly at managing director or director level. Staff were notified on Monday that meetings set for Tuesday Feb. 7 have been canceled, pushing back conversations on bonuses, according to people familiar with the matter. The Swiss lender is already cutting its overall bonus pool for 2022 by as much as 50% after a year in which it was forced to raise capital. At the same time the bank's leadership is offering some senior staff upfront cash payments to incentivize them to stay. S&P 500 futures climbed 0.1% as of 5:44 a.m. in New York, while Nasdaq 100 contracts added 0.3%. The Bloomberg Dollar Spot Index retreated from the day's highs, boosting most Group-of-1o currencies. Treasury yields pulled back after two days of outsized gains. Oil climbed with gold, while Bitcoin advanced for a second day. To catch up on the trading day in the UK and Europe, check out Tuesday's edition of Markets Today. At 8:30 a.m. today, we'll get US trade balance data. Fed Chair Jerome Powell will speak at 12 p.m., followed by comments from Fed Vice Chair for Supervision Michael Barr due at 2 p.m. At 1 p.m., the US will sell $40 billion in three-year notes. Earnings today include KKR, DuPont, Prudential, Chipotle and Carlyle. What's your outlook for home prices and mortgage rates? And if you could work from anywhere in the world, where would you move? Share your views in our latest MLIV Pulse survey. Here's what caught our eye over the past 24 hours: The economy remains incredibly tough to read. I've said it in the past, but one reasonable approach to thinking about this moment is to simply take all the big macro trends from 2010 and just turn them upside down. Back then banks were sickly. Today banks are healthy. Back then, tech was booming. These days, tech companies are laying workers off. Back then, inflation was persistently low and the labor market was persistently weak. These days, it's the unemployment rate remaining stubbornly low, while the inflation number remains close to multi-decade highs. And from a market perspective, back then people used to talk about the "Fed put", and how every time stocks started to wobble, investors could rest assured that the Fed would soon intervene, and ease policy, helping to put a floor under risk assets. It's why "Buy The Dip" became the dominant investing strategy of the decade. Of course the flipside of the Fed Put is the Fed Call. When things get good and hot, the risk arises of the Fed stepping in and putting a lid on the activity. The re-emergence of the Fed call might be the story of the last two days: Here's Bloomberg's Edward Bolingbroke: Friday's stronger-than-expected jobs numbers ignited the jump in front-end yields, while a slide in European bonds further fueled the rise on Monday. Before the release of the jobs report, traders already were looking at a quarter-point rate hike at the central bank's next policy meeting in March as a done deal. Now, an increase at the next meeting in May is also looking highly likely, and another in June is being viewed as a possibility too, according to pricing in overnight index swaps.
And yesterday, Raphael Bostic of the Atlanta Fed said that Friday's strong jobs report may cause the Fed to push rates to a higher peak than previously anticipated. In addition to the strong labor data, there are other hints of a cyclical upswing happening in the economy. What's more, the strength in the data comes as Powell and other Fed officials had been talking about an ongoing slowdown. Today at noon, Fed Chairman Powell speaks in Washington DC and then tomorrow there's a slew of speakers including Kashkari and Waller. The big question is to what degree do they buy that the economy has positive momentum currently, and to what extent (if any) that momentum causes them to revise their thinking about the number of hikes we'll need to see over the next several months. Speaking of economic data, keep watching housing. This was the one area that had gotten absolutely clobbered (for good reason) by the rapid rate hikes of 2022. Anyway, the Bloomberg Economics US Housing and Real Estate surprise index (which measure the degree to which the housing data is coming in better or worse than expectations) has been sharply climbing. It's now at its highest level since April 2022, and it's close to turning positive. The Fed doesn't have a "kill the housing market" mandate. But if the one sector that's most clearly affected by rates is gathering steam again, that may be a sign of more work to be done. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart | 
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