Following a strong jobs report, a signed deal to raise the country’s borrowing limit, and the start of the Fed’s quiet period ahead of its June 13-14 policy meeting, the investors will get some sort of reprieve in the week ahead.
Investors reading the Fed’s tea leaves now see the central bank suspending rate hikes in two weeks, but some economists say May Jobs’ report proves the Fed’s job is not done. The US economy added more than 300,000 jobs last month, the most since January.
On the corporate side, earnings will continue to slide, with results from meme stock favorite GameStop (GME) serving as a highlight.
Apple’s latest Worldwide Developers Conference on Monday at its headquarters in Cupertino, Calif., will be one of the biggest events of the week, with the iPhone maker set to unveil its mixed reality headset, among other upgrades of its product line. Yahoo Finance’s Dan Howley will be live from the field with full coverage on Monday.
Investors have largely ignored any potential market uncertainty related to the debt ceiling over the past week, with the market instead focusing on renewed enthusiasm for tech stocks, which soared to close May. .
During the week, all three major indexes rose more than 3%, with the Nasdaq Composite (^IXIC) rising again more than 4%. Year-to-date, the Nasdaq Composite (^IXIC) is up 26.5%, while the S&P 500 (^GSPC) is up 11.5% and the Dow Jones Industrial Average (^DJI) gained just under 2%.
The S&P 500 ended last week’s trading at its highest level since August 2022, with the team at Bespoke Investment Group noting Friday the benchmark is now unchanged on a total return basis since the start of Fed rate hikes in March 2022.
May jobs on Friday showed the US economy added 339,000 jobs in May, while job gains were revised up for each of the past two months. The jobless rate rose to 3.7% last month, while wage gains fell to 4.3% over the past year.
“Despite an unexpected increase in the unemployment rate, the main conclusion from the May jobs data is that the labor market remains surprisingly strong and resilient,” Citi economist Veronica Clark wrote in a note Friday.
“It will be difficult for the Fed to conclude that activity is slowing enough to bring inflation sustainably back to its target. We continue to expect rate hikes of 25 basis points in June and July.”
But whatever happens in June, strong data has economists thinking interest rates could stay higher for longer.
“The Federal Reserve is nowhere near declaring victory on inflation control,” Oxford Economics chief U.S. economist Ryan Sweet wrote on Friday. “We cannot rule out further rate hikes in the second half of the year, but the central bank will be more cautious than we previously expected in easing monetary policy in 2024.”
Data from the CME Group on Friday showed investors still expect the Fed to keep rates unchanged on June 14.
And with investors appearing confident in the Fed’s next move, hype around AI stocks pushed markets higher for a second straight week.
Bank of America research showed investors bought tech stocks in May at the most aggressive pace since February 2021. And not everyone chasing this theme is limited to Nvidia (NVDA).
The latest name to emerge in the AI race was MongoDB (MDB), which saw its stock gain nearly 30% on Friday, as CEO Dev Ittycheria noted in the company’s earnings release: “We believe that recent breakthroughs in AI represent the next frontier of software. development.”
But Jefferies stock analyst Andrew Uerkwitz argued in a note that the buzz phrase for tech this week will be XR, not AI, Apples is expected to launch its new headset on Monday in what Uerwkitz said could be ” one of the most important days in recent Apple history.”
Unlike Microsoft (MSFT) and Google (GOOGL), which mentioned AI north of 45 times during their earnings calls according to Jefferies, Apple only mentioned Wall Street’s favorite phrase of 2023 twice during their earnings calls. its call with investors in early May.
“We expect an ongoing measured approach – likely focused on highlighting where [AI is] currently being rolled out and arguing that Apple is the platform that its developers will safely deploy the new technology,” Uerkwitz wrote. investors are only beginning to question this strategy. “
In addition to the rally in AI stocks, last week’s trade action showed sectors of the market that had been battered in recent months regained favor after Friday’s jobs report. The SDPR S&P Regional Banking ETF (KRE), for example, rose more than 6% on Friday. Meanwhile, industrial (XLI) and materials (XLB) stocks also rebounded on Friday, with names such as 3M Company (MMM) and Caterpillar (CAT) up nearly 10%.
And while Friday’s action showed investors betting on more cyclical names tied to the business cycle, not all economists and strategists are convinced this data set changes the long-term story of the US economy. . One in which a recession remains on the horizon.
“We see ourselves in this late-cycle environment, which can be really misleading,” Emily Roland, co-head of investment strategy at John Hancock Investment Management, told Yahoo Finance Live.
“Data is bouncing all over the place. Again, we’re seeing very different readings on the economy. We think it’s likely to play out in a recession.”
Weekly schedule
Monday
Earnings: No notable benefits expected for release.
Economic data : S&P Global US Services PMI, May final (55.1 expected, 55.1 previously); S&P Global US Composite PMI, May final (54.5 expected, 54.5 previously); Industrial orders, April (+0.8% expected, +0.9% previously); Durable goods orders, final April (+1.1% expected, +1.1% previously); ISM services index, May (52.4 forecast, 51.9 previously)
Tuesday
Economic data : None
Earnings: Academy Sports + Outdoors (ASO), Casey’s General Stores (CSY), Cracker Barrel Old Country Store (CBRL) Dave & Busters (PLAY), The JM Smucker Co. (SJM), Stitch Fix (SFIX)
Wednesday
Economic data : Weekly MBA mortgage applications, week ended June 2 (-3.7% previously)
Earnings: Campbell Soup Company (CPB), GameStop (GME), Rent the Runway (RENT), The Lovesac Company (LOVE), Vera Bradley (VRA)
THURSDAY
Economic data : Initial weekly jobless claims (238,000 expected, 232,000 previously); Continuing claims, week ended May 27 (1.8 million forecast, 1.8 million previously); Wholesalers’ inventories, month-on-month, April (-0.1% expected, +0.1% previously); Wholesale trade sales, month-over-month, April (+1% expected, -2.1% previously)
Earnings: Docusign (DOCU), Duckhorn Wallet (NAPA)
Friday
Economic data : No notable datasets for publication.
Earnings: Nio (NIO)
Josh is a reporter for Yahoo Finance.
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