Stocks notched a solid gain last week as rate-cut expectations paced the rally as the
Q1 earnings season wound down.
Stocks Climb Steadily
Monday opened with stocks picking up where they left off the prior Friday. Stocks
were still basking in the afterglow of fresh jobs data, which eased investor concerns
of an overheating economy. That and reports of a possible Middle East ceasefire
fueled Monday’s rally. Stocks hung out in a narrow trading band Tuesday and
Wednesday, yawning at the sparse economic news and a handful of negative
earnings results. By contrast, the Nasdaq edged lower over those two days. On
Thursday, the S&P 500 closed above 5,200 for the first time since early April. The
next day, stocks rallied, and the Dow clinched its eighth consecutive day of gains,
the longest winning streak since December and its best weekly performance this
year. Fresh data showed consumers continue to have inflation concerns for the year
ahead, which was unsettling.
Jobs Market Shows a “Goldilocks” Outlook
Jobs data from the past few months have shown unemployment levels remain low
while job growth stays strong—but not too hot. And last week’s Conference Board's
employment trends index for April projected slower jobs growth in the second half.
The markets all year have responded well when the “Goldilocks” outlook suggests
that economic indicators are “just right.”
This Week: Key Economic Data
Monday: Fed Official Loretta Mester Speech.
Tuesday: Producer Price Index. NFIB Small Business Optimism Index.
Wednesday: Consumer Price Index. Retail Sales. Business Inventories. Fed
Official Neel Kashkari Speech.
Thursday: Housing Starts. Jobless Claims. Industrial Production. Import & Export
Prices. Fed Official Speeches: Patrick Harker, Raphael Bostic.
Friday: Leading Indicators.
This Week: Companies Reporting Earnings
Final Thoughts
The market had a good week last week. Looking forward, the big news for the week
is on Wednesday. We get April’s inflation data in the form of CPI (consumer price
index). The first three months of the year showed sticky inflation data and caused
the market to discount the idea of interest rate cuts. A light inflation number for
April might mean the market might once again begin to price in rate cuts. This
would likely push stocks higher in the near term as stocks like lower interest
rates. One month doesn’t make a trend and the Federal Reserve has sworn they are
data dependent. So, I am in the camp that it will take a few more months than just
April of lighter CPI numbers to nudge the Fed towards a rate cut. Of course, the
number could come in hot which would dash hopes of any imminent rate cut in the
near future. We, along with markets, will be watching at 8:30am on Wednesday to
hear the news. Of course, all the short-term gyrations matter not to the long-term
investor. It is good to understand where they’re coming from though.
Stay tuned…
