Over the next week, investors will see debt ceiling fears fade in a week of shortened holidays.
This week’s events will be punctuated by the May jobs report on Friday as the focus shifts away from US default concerns to the Federal Reserve’s next interest rate announcement on June 14.
Late Saturday, President Biden and House Speaker Kevin McCarthy announced a two-year interim debt ceiling deal, with lawmakers set to begin work to pass the bill by the June 5 deadline.
Outside of Friday’s jobs report, data on the housing market and consumer confidence will feature alongside a sprinkling of corporate earnings reports. US markets will be closed on Monday for Memorial Day.
Uncertainty over the U.S. debt ceiling has played a bigger role in investor conversations than market movements in recent weeks, with hype about the current AI boom boosting tech stocks last week. And that conversation should die off this week, paving the way for more AI thought leaders to take more oxygen in the room.
Chipmaker Nvidia (^GSPC) gained 2.5% last week, while the S&P 500 (^GSPC) gained 0.3% and the Dow (^DJI) fell 1%.
Friday’s May jobs report is expected to show the unemployment rate rose slightly to 3.5%, adding 180,000 nonfarm payrolls to the US economy last month, according to Bloomberg data.
The US economy unexpectedly added 253,000 strong nonfarm payrolls in April and the unemployment rate fell to 3.4%, the lowest since May 1969.
The report is one of several key data points the Federal Reserve will consider ahead of the next Federal Open Market Committee meeting scheduled for June 13 and 14.
Expectations for the central bank’s next move are becoming more complicated as the stronger-than-expected economic data continues to be released. Following last week’s inflation data, CME Group data showed the market priced in a more than 50% chance that the Fed would raise rates by another 0.25% on June 14. In late April, investors thought the Fed was more likely to cut rates than raise them in June.
Bank of America’s U.S. economic team, led by Michael Gaipen, said in a note to clients on Friday that “inflation is running at more than double the target rate of 2% and unemployment is at the long-term rate expected by all FOMC participants. lower than that,” he said. .
“There will be one more employment report (June 2) and one more consumer price index (June 13) before the June decision, and one more each before the July meeting. , non-farm payrolls have increased by more than 200,000 people, which we believe is stable or steady. would go to ”
On the enterprise side, the next week will focus on the earnings of tech and retail companies such as HP (HPQ), Salesforce (CRM), Okta (OKTA), Dell (DELL), Macy’s (M) and Lululemon (LULU). . Report quarterly results.
These reports will further shed light on a variety of consumer landscapes this earnings season. Some firms are warning of a discretionary slowdown, while others suggest the apparel market is booming.
All in all, the S&P 500 companies have outperformed Wall Street’s expectations, but the index reports a second consecutive quarter of declines in total earnings. S&P 500 earnings fell 2.2% in the first quarter, with 81 companies forecasting negative EPS, the highest since the third quarter of 2019, according to FactSet data. .
Investors can also get more revenue results from the AI industry with C3a.i. (AI) is expected to announce earnings on Wednesday. The company’s stock has been the biggest beneficiary of the AI boom, up more than 190% so far this year.
AI announcements have already been the talk of the first quarter earnings season, but last week saw a climax of investor excitement.
Nvidia shares surged nearly 25% on Thursday as the company provided earnings guidance for the quarter that beat Wall Street expectations by more than 50%. A day later, shares of Marvell Technology (MRVL) soared more than 30% after the company predicted that its AI revenues could double next year.
“As companies race to apply generative AI to every product, service, and business process, the global data center infrastructure being installed is shifting from general-purpose computing to accelerated computing,” said Nvidia CEO Jensen Huang on Thursday. We will move to computing,” he said. “We are significantly increasing our supply to meet the surging demand.”
And investors are starting to see the AI hype contributing to the overall market rally this year, with the Nasdaq up 24%.
“The U.S. market is underpinned by the AL theme and is likely to become more interest rate sensitive,” Citi strategists said in a note to clients last week. “Of course, the theme is very specific to the US market, so we expect the US to outperform at the end of Fed policy.”
Citi added, “While AI stocks have clearly experienced extreme price moves, we believe it is too early to mitigate this trend, especially at a time when monetizable use cases are still in the future and barriers to entry are not too high. I anticipate,” he added. Take action before AI becomes disappointing. ”
And since the Fed’s expectations have been far from consensus lately, it seems likely that the “safest” place for investors to hide into the summer of 2023 may be on the AI hype train.
“Uncertainty in the macro narrative of 2023 means great confidence in AI’s new micronarrative,” said Michael Hartnett of Bank of America Global Research on Friday. I wrote.
weekly calendar
Monday
The market is closed for Memorial Day.
Tuesday
Economic data: Dallas Fed Manufacturing Activity, May (forecast -17, last -23.4). His FHFA Home Price Index for March (+0.2% forecast, +0.5% last time). S&P Corelogic Case Syrah, 20 City Aggregate, March m/m (-0.05% forecast, +0.06% prior). S&P CoreLogic Case Syrah 20 Cities Aggregate YoY, Mar (-1.70% forecast, +0.36% prior). Conference Board May Consumer Confidence (forecast 99.1, previous 101.3)
Earnings: Box (BOX), HP Inc. (HPQ), Hewlett Packard Enterprise (HPE), U-Haul (UHAL)
Wednesday
Economic data: MBA mortgage applications (formerly -4.6%); MNI Chicago PMI in May (forecast 47.0, last 48.6). JOLTS job openings, April (forecast 9.48 million, previous 9.59 million).Federal Reserve Beige Book
Earnings: Advance Auto Parts (AAP), Capri Holdings (CPRI), Chewy (CHWY), Crowdstrike (CRWD), C3.ai (AI), Nordstrom (JWN), Okta (OKTA), Purestorage (PSTG), Salesforce (CRM)
Thursday
Economic data: Challenger job cuts, year-over-year, May (up 175.9% in the previous year). Unit labor costs, Q1, final (forecast +6.2%, previous +6.3%). Nonfarm productivity, Q1, final (forecast -2.6%, last -2.7%). Weekly initial unemployment claims (forecast 235,000, previous 229,000)
Earnings: Broadcom (AVGO), Dell Technologies (DELL), Dollar General (DG), Five Below (FIVE), Hormel Foods (HRL), Land’s End (LE), Lululemon (LULU), Macy’s (M), Zscaler (ZS)
Friday
Economic data: April non-farm payrolls (forecast +180,000 vs last +253,000). Unemployment rate in April (3.5% forecast, 3.4% previously). Average hourly earnings in May, m/m (forecast +0.3%, last +0.5%). Average hourly earnings in May, YoY (forecast +4.4%, previous +4.4%). Average working hours per week in May (forecast 34.4 hours, last time 34.4 hours). Labor force participation rate, May (forecast 62.6%, last time 62.6%)
Earnings: N.o Significant returns.
Monday
The market is closed for Memorial Day.
Tuesday
Economic data: Dallas Fed Manufacturing Activity, May (forecast -17, last -23.4). His FHFA Home Price Index for March (+0.2% forecast, +0.5% last time). S&P Corelogic Case Syrah, 20 City Aggregate, March m/m (-0.05% forecast, +0.06% prior). S&P CoreLogic Case Syrah 20 Cities Aggregate YoY, Mar (-1.70% forecast, +0.36% prior). Conference Board May Consumer Confidence (forecast 99.1, previous 101.3)
Earnings: Box (BOX), HP Inc. (HPQ), Hewlett Packard Enterprise (HPE), U-Haul (UHAL)
Wednesday
Economic data: MBA mortgage applications (formerly -4.6%); MNI Chicago PMI in May (forecast 47.0, last 48.6). JOLTS job openings, April (forecast 9.48 million, previous 9.59 million).Federal Reserve Beige Book
Earnings: Advance Auto Parts (AAP), Capri Holdings (CPRI), Chewy (CHWY), Crowdstrike (CRWD), C3.ai (AI), Nordstrom (JWN), Okta (OKTA), Purestorage (PSTG), Salesforce (CRM)
Thursday
Economic data: Challenger job cuts, year-over-year, May (up 175.9% in the previous year). Unit labor costs, Q1, final (forecast +6.2%, previous +6.3%). Nonfarm productivity, Q1, final (forecast -2.6%, last -2.7%). Weekly initial unemployment claims (forecast 235,000, previous 229,000)
Earnings: Broadcom (AVGO), Dell Technologies (DELL), Dollar General (DG), Five Below (FIVE), Hormel Foods (HRL), Land’s End (LE), Lululemon (LULU), Macy’s (M), Zscaler (ZS)
Friday
Economic data: April non-farm payrolls (forecast +180,000 vs last +253,000). Unemployment rate in April (3.5% forecast, 3.4% previously). Average hourly earnings in May, m/m (forecast +0.3%, last +0.5%). Average hourly earnings in May, YoY (forecast +4.4%, previous +4.4%). Average working hours per week in May (forecast 34.4 hours, last time 34.4 hours). Labor force participation rate, May (forecast 62.6%, last time 62.6%)
Earnings: N.o Significant returns.
Click here for the latest stock market news and in-depth analysis, including events that move stock prices
Read the latest financial and business news from Yahoo Finance
