Traders and investors alike are in for a busy week with key inflation data, FOMC minutes, retail sales, and the big bank earnings that officially begin the 2nd quarter silly season. The index charts remain challenged by overhead resistance levels but the bulls keep knocking on the door despite the low volume and uncertainty that lies ahead. Emotions will likely be very high this week so plan for possible big point moves, whipsaws, and overnight reversals as the market tries to guess the path forward amid all the market-moving data.
Asian markets begin the week mixed with modest gains and losses across the indexes as investors ponder slowing economies. However, European markets trade higher this morning trying to build off the bullishness that closed the indexes higher last Thursday. U.S. futures on the other hand seem less certain trading modestly and mixed as they ponder pending inflation data and the earnings season beginning on Friday as jobs data indicate the economy is slowing.
We start the week light and ramp up the official 2nd quarter earnings kick-off on Friday with big bank reports. Notable reports for Monday include GBX, PSMT & TLRY.
News & Technicals’
According to the Labor Department’s report, nonfarm payrolls grew by 236,000 in March which is about in line with the Dow Jones estimate of 238,000. The unemployment rate fell to 3.5% from the previous month’s 3.6%. The March jobs report showed a resilient economy and moderate inflation which pushed stock futures and Treasury yields higher. However, the New York Stock Exchange was closed for Good Friday. “As such, the odds of another quarter-point rate hike in May should go higher as the data does not appear to justify a Fed pause,” he added.
Last week’s data hinted at a slowdown in job growth which caused U.S. government debt prices to be higher on Monday. The yield on the benchmark 10-year Treasury note slipped to 3.363% while the yield on the 30-year Treasury bond dipped to 3.581%. The 2-year note yield fell 4 basis points to 3.931%. Remember that prices move inversely to yields.
The U.S. Defense Department is launching an interagency investigation into the source and the damage potential of a trove of classified documents that were leaked onto social media over the past few days. According to reports, the documents contained sensitive information on not just Ukraine but also China, the Middle East, and Africa. They also revealed the rate of expenditure of Ukraine’s S-300 air defense systems and a timeline suggesting when they would be depleted – and that they are running dangerously low.
Investors are in for a busy week of economic data. The latest consumer price index and producer price index data are due out Wednesday and Thursday, respectively. These will be key in determining if or when the Fed will pause or put an end to its rate-hiking campaign. The first batch of companies reporting first-quarter financial results will also be released this week. Tilray Brands kicks things off on Monday. The major banks – JPMorgan Chase, Wells Fargo, and Citigroup – will report on Friday. Plan for just about anything this week with so much uncertainty intraday whipsaws and big point overnight reversal is certainly possible.