A strong jobs report has pushed stocks down by the week, as a sharp rise in oil prices amid tensions in the Middle East and concerns over the Federal Reserve's policy to cut interest rates put a damper on the market's strong start to the year. Couldn't save it from decline.
This week, the Dow Jones Industrial Average (^DJI) led the decline, dropping nearly 2.3%, or more than 900 points. This was the Dow's worst weekly performance in more than a year. Meanwhile, the S&P 500 Index (^GSPC) fell nearly 1%, and the tech-heavy Nasdaq Composite Index (^IXIC) fell 0.8%.
Over the coming week, investors will be treated to new information on inflation and the start of first-quarter earnings season.
On the corporate side, JPMorgan (JPM), Wells Fargo (WFC), BlackRock (BLK), and Citi (C) are scheduled to report their financial results, along with Delta Air Lines (DAL).
Elsewhere in economic news, expect minutes from the Federal Reserve's March meeting and an update on consumer sentiment.
interest rate discussion
At its last meeting, the Fed maintained its outlook for three rate cuts this year, but there is growing debate about whether to reduce the rate of cuts or postpone them altogether.
Minneapolis Fed President Neel Kashkari on Thursday suggested the Fed may not cut interest rates this year if inflation stalls. And after the March jobs report showed the labor market remained remarkably resilient. Torsten Slok, chief economist at Apollo Global Management, said the report was consistent with previous calls for no cuts this year. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
“We remain firmly of the view that the Fed will not cut rates this year,” Slok said in a note to clients.
Some also believe Friday's numbers signal some positive developments on the supply side of the labor market, supporting the view that a strong labor market and wage growth do not necessarily drive inflation.
“This report suggests that the Fed could begin a cautious and gradual easing cycle later this year, as long as future data on inflation shows improvement,” said Michael Gapen, U.S. economist at Bank of America. “We see this as supporting Chairman Powell's view.” Friday.
price check
Next Wednesday, the consumer price index for March will be released, providing another update on inflation. Some have suggested that seasonal effects may have made inflation unstable at the start of the year, but economists will be watching closely to see whether inflation returns to a downward trend in March.
Wall Street expects the headline CPI, which includes food and energy prices, to rise 3.5% for the year, up from February's headline CPI of 3.2%. Prices are expected to rise 0.4% month-on-month, matching February's rise.
“Core” inflation, which excludes food and energy prices, is expected to rise 3.7% from a year ago, slowing from February's 3.8% rise. Monthly core price inflation is expected to be 0.3%, slower than the 0.4% rise in January and February.
“March's CPI report shows whether the acceleration in inflation in early 2024 was due to noise from the start of the year, or whether it is a substantive picture of the process by which inflation will return to the Fed's target,” said Sarah, a senior economist at Wells Fargo. “This will be an important indicator of how well we have achieved.” House wrote in a note to clients: “We believe it will show hints of both dynamics.”
A new financial year begins
Delta Air Lines is scheduled to report earnings before the bell on Wednesday, an appetizer for investors before many of the nation's largest financial institutions, including JPMorgan, formally open their first-quarter reporting season on Friday. becomes.
Wall Street broadly expects the first quarter to set the tone for solid earnings growth for S&P 500 companies. Consensus expects first-quarter growth for S&P 500 companies to be 3.2% year-over-year. For the full year, Wall Street expects S&P 500 earnings to rise 10.9%.
From a broader perspective, the two key themes to watch are which sectors are seeing earnings growth and, as always, how the current economic environment will impact the rest of the year. What corporate executives think about.
Wall Street strategists are keeping an eye on whether non-tech earnings will pick up, as they have helped fuel the stock market's recent rally.
Part of the rally is fueled by expectations that the S&P 493 companies that did not participate in the Magnificent Seven-led bull market will begin to see higher profits in 2023. Binky Chadha, chief equity strategist at Deutsche Bank, believes there are signs of profit rotation. The current quarter begins with mega-cap growth, with tech companies expected to see slower year-over-year profit growth than last quarter.
“We can always talk about price trends and whether the rally is increasing or not, but at the end of the day, earnings and fundamentals matter,” Chadha told Yahoo Finance. “He thinks earnings growth will accelerate outside of mega-cap tech, but he thinks earnings growth will essentially start to slow in mega-cap tech.”
Mr. Chadha did not foresee the moment when the floor would fall off while he was working. He said tech companies' earnings this quarter would be “fueled” by further rotation in the market due to the sector's sequential slowdown in growth and recovery in other sectors' earnings.
weekly calendar
Monday
Economic data: New York Fed 1-year inflation expectations, March (previously 3.04%)
Revenue: There are no significant profits.
Tuesday
Economic Data: NFIB Small Business Optimism, March (estimated 90.0, previously 89.4)
Revenue: WD-40 (WDFC), Tilray (TLRY)
Wednesday
Economic data: Consumer price index for March, month-over-month (expected +0.4%, previously +0.4%). Core CPI in March compared to the previous month (forecast +0.3%, previous +0.4%). March CPI, year-on-year change (forecast +3.5%, previous +3.2%). Core CPI, YoY, March (expected +3.7%, previous +3.8%). Real average hourly wage, year-over-year, March (+1.1% last time) MBA home loan applications, week ending April 5th (-0.6%). FOMC Minutes
Revenue: Delta Air Lines (DAL), Runway Rental (RENT)
Thursday
Economic data: New jobless claims for the week ending April 6 (previously 221,000). Producer price index for March, month-over-month (forecast +0.3%, previous +0.6%). His PPI in March, YoY (last time he increased by 1.6%)
Revenue: CarMax (KMX), Constellation Brands (STZ)
Friday
Economic data: Import prices, month-on-month, March (expected +0.4%, previous +0.3%). Export prices in March compared to the previous month (forecast +0.1%, previous +0.8). University of Michigan Consumer Sentiment, April preliminary figure (expected 80.0, previous 79.4).
Earnings: BlackRock (BLK), Citigroup (C), JP Morgan (JPM), Progressive (PGR), State Street (STT), Wells Fargo (WFC)
