Stocks could build on gains in the week ahead as investors await Friday’s jobs report
As investors wait for Friday’s employment report, stocks could continue to benefit from this rally through next week.
The past week saw huge gains for all three major indices, with each index rising above 6%. The indexes are both the S&P 500 Nasdaq CompositeA seven-week streak of losing was broken, while there had been eight consecutive weeks of losses. Dow Jones Industrial Average.
Sam Stovall (chief investment strategist, CFRA Research) stated that “I believe this is the beginning for that long-awaited relief rally.”
Friday’s May Employment Report is the most significant data in a calendar which also contains ISM Manufacturing, Job Openings Data and Federal Reserve’s Beige Book.
“I believe the 325,000 consensus [nonfarm payrolls]Number, which we can easily beat. However, it is just math,” stated Alex Chaloff co-heading investment strategies at Bernstein Private Wealth Management. He pointed out that prior-month data could have positive revisions, just as in previous reports.
According to economists, the rate of job creation should slow. from 428,000 jobs in April.Covid spikes are a major reason why you can’t keep up that pace of growth. Chaloff said that this is just a bit of air for the 325,000 numbers.
Stocks were volatile over the last week, however they moved significantly higher following the Federal Reserve’s release. minutes from its last meeting.
The S&P 500 gained 6.5% to 4,158, the best week since November, 2020. Dow Jones was up 6.2% while Nasdaq was at 6.8%.
It was looking for a catalyst and the Fed provided it. Stovall stated that the Fed was not more hawkish and would speed up rate tightening.
“I think that investors were assuming they were aheadloading the rate-hiking cycle. This could mean they might end up pausing sometime in the third quarter,” he said. That’s my belief was the rally trigger. “The market was just too oversold in sentiment and breadth. They were ready for some good news, and the Fed gave it.”
Chaloff stated that the market expects the Federal Reserve will raise interest rates 50 basis points (or a quarter of a point) at its two next meetings. This could lead to some volatility, however, Chaloff said that the Fed will raise interest rates by 50 basis points or a half percentage point at each of its next two meetings.
“I think that this is the beginning of a bounce, but we have Fed meetings in June. He said that there will be a Fed meeting at the end of July. The Fed meeting in July will have an effect on the markets. You will feel jittery when the Fed admits that they still have work to complete. This is not the ceiling. It’s wonderful to see the markets respond to good macro data.
Stocks could rise for the moment, however. Chaloff stated that “I think it hasn’t been a crazy volume week so it’s nice, it’s fun, it’s great, it’s great to head into the long weekend with some strength and starting the summer strong, but it hasn’t had the breadth or depth.” “It’s not danceable, everyone,” Chaloff said. We’re not there yet’ … We think we’re through the worst of it, but not all of it.”
Chaloff indicated that he is watching closely to determine if the hedge funds start to purchase in the next week. It could be a catalyst to the market.
He said that these types of weeks are a way to build upon themselves.
While any developments on the weekend may be significant, weekends can also serve as a chance for investors to reflect. Chaloff explained that “if people are unable to touch their money for more than 48 hours or 72 hours after a very bad week, it can really impact the open of your week.”
In the last week, bond yields were steady and lower. On Friday, the 10-year yield stood at 2.74%.
Chaloff stated that he believes it is positive for bonds and stocks. After seven to eight weeks of outflows, you start to see inflows into all kinds of fixed income instruments, which keeps yields low.
It is also positive news for the growth companies, which were among those hardest affected when interest rates rose.
On Tuesday, markets close for the May month. As of Friday, the Dow and S&P 500 were both flattish for the month but negative for the Nasdaq.
Stovall said June is usually positive for the S&P 500. June has a lot of swoons. He said that it was “middling” in terms of performance.
Week ahead calendar
Memorial Day holiday
9:00 a.m. S&P/Case-Shiller home prices
10:00 a.m. FHFA Home Prices
Chicago PMI at 9:45 AM
10:00 am. Confidence of consumers
Monthly vehicle sales
9:45 am Manufacturing PMI
10:00 AM ISM manufacturing
10:00 am Construction spending
10:00 AM JOLTS
2:00 p.m. Beige Book
8:15 a.m. ADP payroll data
8:15 a.m. Jobless Claims
8:30 a.m. Productivity and cost
10:00 a.m. Orders from factories
8:30 AM Employment
PMI services at 9:45
10:00 am. ISM Services