- It’s a big week for the stock market with a deluge of economic data set to be released.
- A Fed press conference, the April jobs report, and quarterly earnings will be closely watched by investors.
- Here are five major events to keep an eye on this week, according to Raymond James’ chief investment officer.
1. “Powell’s press conference could bring fireworks.”
During the upcoming meeting, it is anticipated that the Fed will maintain the current interest rates. However, Powell’s remarks may shed light on his stance regarding future interest rate cuts, whether he leans towards being hawkish or dovish. The recent series of inflation reports, exceeding expectations, has put the Fed in a state of alertness concerning the possibility of interest rate cuts. Consequently, investors are growing restless as they await further developments.
According to Adam, Powell is expected to stick to his ‘data dependence’ script during his speech. He is likely to emphasize that interest rates are currently at their highest level but may need to remain restrictive for a bit longer. However, Powell will also need to address concerns raised by this week’s slower economic growth and higher inflation, as indicated in the GDP report. Additionally, there might be questions about whether the three rate cuts that were previously projected in the March dot plot are still relevant.
Powell could provide additional information regarding the Federal Reserve’s plans to reduce its balance sheet, which has the potential to affect stock prices.
2. “All eyes on the quarterly refunding announcement.”
On Monday, the Treasury Department will unveil its borrowing requirements for the upcoming quarter. Additionally, they will provide specific information regarding the composition of issuance between Treasury bills and coupons.
The Treasury’s operating account is currently sitting on a significant amount of cash, with tax receipts surging to $955 billion this year. This surplus indicates that the Treasury may not need to issue a large number of new bonds this quarter, which would be seen as a positive development by the market.
Adam explained that there is both good news and bad news regarding investor appetite for Treasurys. The good news is that investor appetite has remained healthy. However, the bad news is that the ongoing ~$2T deficits have resulted in a significant net Treasury supply that the market needs to absorb.
3. “Will earnings growth deliver to keep the rally going?”
This week is going to be incredibly busy in terms of earnings releases, with more than 170 S&P 500 companies scheduled to announce their first-quarter earnings results. Among the major players, Amazon is set to report on Tuesday, while Apple is expected to release its earnings on Thursday.
S&P 500 earnings are currently on track to increase by approximately 1.6% compared to the previous year. This growth is primarily attributed to the success of mega-cap tech companies. As we move forward, investors will pay close attention to the guidance provided by company CEOs, as their insights will be crucial in determining the outlook for the rest of the year.
According to Adam, in order for the market to continue moving higher from its current levels, earnings will need to play a crucial role, especially since valuations are already trading near the upper end of their 20-year range.
4. “Manufacturing and service activity improving?”
The ISM Manufacturing data released last month brought a surprising surge, propelling it into expansion territory for the first time since October 2022. This month, new data from the index is set to be released on Wednesday, with hopes high for a continued expansion in its second consecutive month. Furthermore, the ISM Services data, scheduled for release on Friday, is anticipated to demonstrate ongoing expansion for the remarkable 15th month in a row.
According to Adam, this holds significance due to the fact that the services sector plays a more significant role in the economy compared to manufacturing. He further adds that these figures indicate a growing economy, although the growth rate may be more moderate.
5. “Will the labor market’s resilience last?”
Investors are eagerly awaiting the release of the April jobs report on Friday. According to economists, the economy is expected to add around 250,000 jobs, which will be a significant boost. Additionally, if the unemployment rate remains below 4%, it will tie the second longest consecutive streak on record. This data will provide valuable insights into the current state of the job market and its impact on the economy.
The job market is displaying indications of a decrease in momentum.
“The ISM Manufacturing and Services readings indicate that the employment subsectors are currently experiencing a contraction, and the number of job openings is at its lowest level since March 2021. According to Adam, the upcoming jobs report will offer valuable insights into the overall strength of the labor market.”
