More income, April big jobs report and inflation fears could tip markets in coming week

More income, April big jobs report and inflation fears could tip markets in coming week


Traders on the floor of the New York Stock Exchange.

Source: NYSE

April’s jobs report and a flurry of earnings news make it another busy week for the markets, with the calendar rolling into May.

Stocks posted strong gains in April, as real estate investment trusts, consumer discretionary services companies and communications services companies outperformed the market as a whole, all up more than 7%. However, April ended on a bitter note, with shares selling on Friday.

“Since November, there has been a 30% rally,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office. He noted that historically, the period from November to April is the strongest for stocks. “There is the adage ‘sell in May, go’. It may be somewhat appropriate this year as we have been doing so well over the past six months. “

Major work report

The April jobs report is expected to be released on Friday, and the market is expecting a large number.

Economists say the wage bill in April could easily reach 1 million, after 916,000 jobs added in March. Estimates range from around 700,000 to a forecast of 2.1 million according to economists at Jefferies.

According to Dow Jones, there is a consensus forecast of 978,000 among surveyed economists and the unemployment rate is expected to drop from 6% to 5.8%.

Federal Reserve speakers will also be important after Fed Chairman Jerome Powell said last week that the central bank is still looking for “substantial progress” in its targets for the economy.

The president pointed out that the Fed is not close to gradually reducing its bond buying program, a surprise to some investors. Some bond market professionals expected the Fed to start discussing reducing buying at its June meeting and starting to cut its monthly bond purchases by $ 120 billion by the end of the year. year or early next year.

“Next week, it’s all about the number of jobs, because as part of the Fed’s path to ‘substantial progress’ in both roles, we’ll see how far they move down that path next Friday,” he said. said Peter Boockvar, chief investment officer at Bleakley Advisory Group. The Fed’s mandate is to seek full employment and a steady rate of inflation, which it has targeted at 2%.

The Fed expects a temporary period of high inflation which it expects to calm down later in the year, although Boockvar and others say inflation could be hotter than the central bank expects . The basic personal consumption expenditure price index jumped 0.36% in March, the rate a year ago rising from 1.4% to 1.8%. It should go even higher in April. Headline consumer price index inflation is expected to start performing at 3% or better when released on May 12.

Just days after Powell’s comments on the reduction, Dallas Fed Chairman Rob Kaplan said on Friday the Fed should start the discussion on reducing bond purchases, as imbalances in financial markets and the economy are improving faster than expected.

The market’s focus on the Fed’s bond program makes the jobs report even more important. If the central bank started cutting back on these asset purchases, then it would signal that it would be on the way to raising interest rates. Most economists don’t expect the Fed to hike interest rates until 2023.

“If this number of jobs gets really hot, it’s going to make people estimate when the Fed might cut,” said Michael Schumacher, rate manager at Wells Fargo.

Powell is one of the Fed’s speakers next week, but he is not expected to provide new perspectives when he attends a National Community Reinvestment Coalition conference Monday afternoon. Kaplan is speaking Tuesday and Thursday, and New York Fed Chairman John Williams and Cleveland Fed Chairman Loretta Mester are also among the central bank officials who will speak next week.

Profits soar

So far, 87% of S&P 500 companies have beaten earnings estimates, and earnings appear to be increasing by more than 46%, according to Refinitiv.

Credit Suisse chief US equities strategist Jonathan Golub on Friday raised his S&P 500 forecast on the basis of strong earnings. “We are raising our 2021 S&P 500 price target to 4,600 from 4,300, which is up 9.2% from current levels and 22.5% for the year,” he wrote.

Profits are expected from a diverse group of companies, General Motors at ViacomCBS. Pharma will be in the spotlight as manufacturers of Covid vaccines Pfizer and Modern both pay off. Draftkings and Beyond meat are also on the program.

A large number of travel-related companies publish results, including Fund reservation, Hilton Worldwide, Marriott Vacations and Caesars Entertainment. Consumer brands, such as Anheuser Busch Inbev and Estee Lauder also state, as do insurers including AIG, Allstate and MetLife. (A timeline with a few key revenue dates appears below.)

Chang said the market has already dismissed much of the positive news.

“Despite the very strong reports from the signage companies, you are seeing some of the names starting to run out a bit,” Chang said. “I think this is a sign that so much good news has been ruled out. I suspect the market should take a break. I think in the next few months we are probably going to see a sideways move. There will probably be a pullback which is going to be healthy. “

the S&P 500 was up 5.2% in April, ending Friday at 4,181. It is now up 11.2% for the year so far. the Dow rose 2.7% in April, to 33,874, and the Nasdaq gained 5.4% in April, ending Friday at 13,962.

Chang said he expects some of the “boring” blue chips that haven’t been in the rally so much to do better. Some of those names can be found in the pharmaceutical industry, he said.

As the week ahead approaches, investors will be on the lookout for words of wisdom from Warren Buffett at Berkshire Hathaway’s annual meeting on Saturday.

Calendar for the upcoming week

Monday

Monthly vehicle sales

Earnings: Budget Notice, Loews, Alexion Pharmaceuticals, Rambus, Leggett and Platt, Vornado, American water, Iamgold, Mosaic, Apollo Global Management, ZoomInfo, Estee Lauder, ON Semiconductor

9:45 a.m. Manufacturing PMI

10:00 am ISM manufacturing

10:00 a.m. Construction expenses

2 p.m. Survey of senior loan officers

2:10 p.m. New York Fed Chairman John Williams

2:20 p.m. Fed Chairman Jerome Powell at the National Community Reinvestment Coalition conference

Tuesday

Earnings: Pfizer, CVS Health, ConocoPhillips, Martin Marietta Materials, Activision Blizzard, DuPont, KKR, T Mobile, Akamai, Pioneer natural resources, Lattice semiconductor, Denny’s, Hyatt Hotels, Host hotels, PerkinElmer, Prudential Financial, Viavi, Caesars Entertainment, Thomson Reuters, Cummins, Vulcan materials

8:30 am International trade

10:00 Factory orders

1:00 p.m .: Robert Kaplan, president of the Dallas Fed

1:00 p.m. Neel Kashkari, Chairman of the Minneapolis Fed

Wednesday

Earnings: General Motors, Hilton Worldwide, Fund reservation, Fox Corp., Uber Technologies, Etsy, Pay Pal, Allstate, Hug, Cognitive technology, MetLife, Marriott Vacations, CF Industries, Marathon Oil, CyberArk Software, Emerson Electric, Amerisourcebergen, BorgWarner, Zynga, Tangier Factory Store, Twilio

8:15 a.m. ADP job

9:30 a.m. Charles Evans, President of the Chicago Fed

9.45 a.m. PMI Services

10:00 am ISM Services

11:00 a.m .: Eric Rosengren, President of the Boston Fed

12:00 p.m .: Loretta Mester, President of the Cleveland Fed

3:00 p.m. Chicago Fed Evans

Thursday

Earnings: Regeneron, ViacomCBS, Kellogg, Modern, Murphy’s Oil, Beyond meat, Shake Shack, Square, Roku, Axon, Cushman and Wakefield, Tapestry, Neilsen, AIG, Anheuser-Busch, EOG Resources, Consolidated Edison, DropBox, Expedia, Year, Interactive platoon, Datadog, Cardinal health, Ambac Financial

8:30 a.m. Initial jobless claims

8:30 am Productivity and costs

9 a.m. John Williams of the New York Fed

10:00 a.m. Kaplan of the Dallas Fed

1:00 p.m. Loretta Mester, President of the Cleveland Fed

1:00 p.m .: Raphael Bostic, President of the Atlanta Fed

Friday

Earnings: Cigna, Siemens, Gannet, AMC Networks, Draftkings, Liberty Broadband, Elanco Animal Health

8:30 am Employment

10:00 a.m. Wholesale

3:00 p.m. Consumer credit

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