Traders on the floor of the NYSE, May 6, 2022.
Source: NYSE
The stock could carry the momentum of this latest rally into next week as investors await Friday’s jobs report.
All three major indices were on track on Friday afternoon and posted huge gains for the week, each rising over 5%. Both S&P 500 And Nasdaq Composite are on pace to break a seven-week losing streak, while it has been for an eight-week loss Dow Jones Industrial Average.
“I think this is the start of a long-awaited relief rally,” said Sam Stovall, chief investment strategist at CFRA Research.
In the coming four days of the week, only a few earnings are going to happen, the report of which salesforce.com, Hewlett Packard Enterprise and online pet retailers chew.
May’s employment report on Friday is the most important data on the calendar that includes ISM manufacturing, job opening data, monthly vehicle sales and the Federal Reserve’s beige book, all on Wednesday.
“I think 325,000 consensus [nonfarm payrolls] Numbers, we could easily beat. But that’s just math,” said Alex Chaloff, co-head of investment strategies at Bernstein Private Wealth Management.
Economists expect job creation to be slow From 428,000 jobs in April. “You can’t continue to grow at that kind of pace, especially with Covid spiking. It’s a little bit of air cover for the 325,000 number,” Chaloff said.
Recovery after Fed minutes
The stock was volatile over the past week, but went up especially after the Federal Reserve issued Minutes from your last meeting,
“It was waiting for some kind of catalyst, and I think it got from the Fed. Not only was it not more bullish, but it said it would accelerate rate tightening,” Stovall said.
“So I think a lot of investors thought they were moving the rate hike cycle, which means they could stop sometime in the third quarter,” he said. “I think that was the rally trigger. The market just got oversold in a breadth and sentiment perspective and it was ripe for some sort of good news and the Fed to deliver.”
Chaloff said the market is expecting the Federal Reserve to raise interest rates by 50 basis points, or half a percentage point, in its next two meetings. That could mean choppy trading during that period, but he added a quarter-point pace of hiking the Fed for the first time should the market hit harder.
“I think this is the initial phase of the boom but we have a Fed meeting in June. We have a Fed meeting in July,” he said. “It will have an impact on the markets. When the Fed is acknowledging that they have work to do, there will be panic. We’re not saying it’s the floor… but a fair response to the markets on solid macro data.” It’s great to see giving.”
However, for now the shares may rise. “I would say it hasn’t really been a crazy volume week, so it’s cool, it’s fun, it’s great to go into a long weekend, start the summer with some strength, but the breadth and depth haven’t been there,” Chaloff said. “I want to say ‘Okay, everyone, we’re not dancing. We’re not there yet’ … We think we’re going through the worst of it, but not all of it.”
looking for a catalyst
Challoff said he would watch to see if hedge funds, which were unloading holdings, start buying in the coming week, a potential positive catalyst for the market.
“Weeks like this help build oneself, so although it’s not a successful week, it’s an important week,” he said.
Any development over the weekend can be important, but the weekend is also a time when investors reflect. “If you have a really bad week, and people can’t touch their money for 48 or 72 hours, you really have a bad open to start the week,” Chaloff said.
Bond yields remained low and stable over the past week. The 10-year yield was up around 2.74% on Friday.
“I think it’s a positive for stocks and obviously for bonds,” Chaloff said. “After seven, eight weeks of outflows you’re going to start getting inflows into all kinds of fixed income instruments, and that keeps yields constrained.”
It is also positive for growth companies that were hardest hit as interest rates rise.
Markets are closed on Tuesdays in the month of May. As of Friday, the Dow and the S&P 500 were both flat for the month but were negative for the Nasdaq.
Stovall said June is generally positive for the S&P 500. “There are usually some setbacks in June. It’s kind of the middle in terms of performance,” he said.
week ahead calendar
monday
memorial day holiday
market closed
Tuesday
Earnings: salesforce.com, Himachal Pradeshambarella, Victoria’s Secret, chargepoint
9:00 AM S&P / Case-Shiller house prices
9:00 am FHFA house prices
9:45 a.m. Chicago PMI
10:00 am Consumer Confidence
Wednesday
Earnings: chew, Hewlett Packard EnterprisesMichael Kors, Capri Holdings, PVH, net storage
monthly vehicle sales
9:45 am Manufacturing PMI
10:00 am ism making
10:00 AM Construction Expenses
10:00 am JOLTS
Beige Book at 2:00 PM
Thursday
Earnings: broadcom, Dear, Hormel FoodsPosture, crowdstrikepager duty, Cooper Kosoktas
8:15 am ADP Payroll Data
Jobless claims at 8:30 am
8:30 AM Productivity and Cost
10:00 AM Factory orders
Friday
Employment at 8:30 am
Services PMI at 9:45 am
10:00 AM ISM Services