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It’s a big week for the stock market with a torrent of economic data to be released.
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A Fed news conference, April’s jobs report and quarterly results will be closely watched by investors.
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According to Raymond James’ chief investment officer, there are five key events to watch this week.
It’s set to be a huge week for the stock market as investors prepare for a barrage of economic data and corporate earnings results.
Raymond James Chief Investment Officer Larry Adam highlighted the top five things to watch this week that could have a big impact on stock prices.
From corporate earnings to April’s jobs report, here’s what Adam says you should watch over the next five days.
1. “Powell’s press conference could bring fireworks.”
Federal Reserve Chair Jerome Powell will speak at the Fed’s May FOMC meeting on Wednesday at 2:30 p.m.
While the Fed is widely expected to leave interest rates unchanged, Powell could offer clues about whether he will make future rate cuts more hawkish or dovish. A back-to-back series of hotter-than-expected inflation reports has kept the Fed on tenterhooks about possible rate cuts, and investors are starting to get nervous.
“Powell is likely to stick to his ‘data dependency’ scenario, reiterating that interest rates have probably peaked but may need to remain restrictive for a little longer. “But Powell will have to deal with questions about the slower growth and higher inflation raised in this week’s GDP report and whether the three rate cuts plotted in the March dot chart are still relevant,” Adam said.
Powell could also provide more details about the Fed’s balance sheet reduction plans, which could impact stock prices.
2. “All eyes are on the quarterly refund announcement.”
The Treasury will announce on Monday its borrowing requirements for the coming quarter and detail the composition of Treasury bill and coupon issuance.
A surge in tax revenues this year has left the Treasury’s operating balance sheet “full of cash” at $955 billion. This suggests that the Treasury will need to issue fewer new bonds this quarter, which the market would welcome.
“The good news: investor appetite for government bonds remains healthy. The bad news: The net supply of government bonds to finance ongoing deficits of about $2 trillion leaves the market with a lot to absorb,” Adam explained.
3. “Will earnings growth help keep the rally going?”
This is one of the busiest weeks for earnings releases, as just over 170 S&P 500 companies are set to release their first quarter earnings results this week. The largest companies reporting include Amazon on Tuesday and Apple on Thursday.
So far, S&P 500 earnings are expected to rise about 1.6% year-over-year, with the bulk of that increase coming from mega-cap technology companies. Investors will be eagerly awaiting advice from company CEOs as the focus shifts to the rest of the year.
“With valuations hovering at the upper end of their 20-year range, earnings will need to act as a catalyst to drive the market higher from current levels,” Adam said.
4. “Improve production and service activities?”
Last month’s release of ISM manufacturing data showed a surprise jump into expansion territory for the first time since October 2022. New data from the index will be released on Wednesday, with expansion expected to continue in the second month. Meanwhile, ISM Services data will be released on Friday and is expected to show continued expansion for the 15th straight month.
“This is important because the services sector accounts for a larger portion of the economy compared to manufacturing. Overall, these numbers reflect an economy that is growing, albeit at a more moderate pace,” Adam said.
5. “Will labor market resilience continue?”
Finally, April’s jobs report, due out on Friday, will be closely watched by investors. The average economist forecast is that the economy will expand by 250,000 new jobs. And if the unemployment rate stays below 4%, it will be the second-longest consecutive record below 4% on record.
However, there are signs of a slowdown in the labor market.
“The employment subsectors within the ISM manufacturing and services readings are both in decline territory and the number of job openings is near its lowest level since March 2021. The jobs report will provide an update on the strength of the labor market,” Adam said.
Read the original article on Business Insider