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It's going to be a massive week for the stock market

Matthew Fox   

It's going to be a massive week for the stock market
  • It's a big week for the stock market with a deluge of economic data set to be released.
  • A Fed press conference, the April jobs report, and quarterly earnings will be closely watched by investors.
  • Here are five major events to keep an eye on this week, according to Raymond James' chief investment officer.

It's going to be a massive week for the stock market as investors prepare for a deluge of economic data and corporate earnings results.

Raymond James' chief investment officer Larry Adam highlighted the top five things to watch this week that could have a big impact on stock market prices.

From corporate earnings to the April jobs report, here's what to keep an eye over the next five days, according to Adam.

1. "Powell's press conference could bring fireworks."

Federal Reserve Chairman Jerome Powell is set to give a speech at 2:30 pm on Wednesday as part of the Fed's May FOMC meeting.

While the Fed is largely expected to keep interest rates unchanged, Powell could offer clues as to whether he is hawkish or dovish on future interest rate cuts. A back-to-back-to-back string of hotter-than-expected inflation reports has kept the Fed on its toes regarding potential interest rate cuts, and investors are starting to get antsy.

"Powell will likely stick to his 'data dependence' script, reiterating that rates are likely at their peak, but may need to remain restrictive for a little longer. However, Powell will need to navigate questions regarding this week's slower growth/hotter inflation flagged in the GDP report and whether the three rate cuts penciled into the March dot plot are still relevant," Adam said.

Powell could also offer more details around the Fed's balance sheet reduction plans, which could have an impact on stock prices.

2. "All eyes on the quarterly refunding announcement."

The Treasury Department is set to announce its borrowing requirements for the upcoming quarter on Monday, as well as detail the composition of issuance between Treasury bills and coupons.

A surge in tax receipts this year has left the Treasury's operating account "flush with cash" at $955 billion. That suggests less need for the Treasury to issue a deluge in new bonds this quarter, which the market would welcome.

"The good news: investor appetite for Treasurys has remained healthy. The bad news: net Treasury supply to fund the ongoing ~$2T deficits leaves plenty for the market to absorb," Adam explained.

3. "Will earnings growth deliver to keep the rally going?"

This is one of the busiest weeks of earnings releases, with just over 170 S&P 500 companies set to report their first-quarter earnings results this week. The biggest companies reporting include Amazon on Tuesday and Apple on Thursday.

So far, S&P 500 earnings are on pace to rise about 1.6% year-over-year, with the bulk of that gain being driven by mega-cap tech companies. Investors will keenly be listening for guidance from company CEOs as focus shifts to the rest of the year.

"As valuations are trading near the upper end of their 20-year range, earnings will need to be the catalyst to drive the market higher from current levels," Adam said.

4. "Manufacturing and service activity improving?"

The release of ISM Manufacturing data last month showed a surprise jump into expansion territory for the first time since October 2022. New data from the index will be released on Wednesday, with expectations that the expansion will continue into its second month. Meanwhile, ISM Services data will be released on Friday and is expected to show continued expansion for the 15th consecutive month.

"This is important, as the services sector makes up a larger portion of the economy relative to manufacturing. In all, these figures reflect an economy that is expanding, albeit at a more modest pace," Adam said.

5. "Will the labor market's resilience last?"

Finally, the April jobs report set to be released on Friday will be closely watched by investors. The median economist forecast is for 250,000 jobs to be added to the economy. And if the unemployment rate remains below 4%, it will tie the second longest consecutive streak below 4% on record.

But there are signs of a slowing jobs market.

"The employment subsectors within ISM Manufacturing and Services readings are both in contraction territory and the number of job openings is near the lowest level since March 2021. The jobs report will provide an update on the strength of the labor market," Adam said.

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