A strong jobs report could not save stocks from weekly losses, as rising oil prices amid tensions in the Middle East and concerns about the path of Fed rate cuts dampened the market's hot start to the year.
Over the course of the week, the Dow Jones Industrial Average led the losses, falling nearly 2.3%, or more than 900 points. This represents the worst weekly performance for the Dow Jones in more than a year. Meanwhile, the S&P 500 (^GSPC) was down nearly 1% and the tech-heavy Nasdaq Composite (^IXIC) was down 0.8%.
Next week, a new inflation reading and the start of the first quarter earnings season will welcome investors.
On the corporate front, JPMorgan (JPM), Wells Fargo (WFC), BlackRock (BLK), and Citi (C) are scheduled to report earnings alongside Delta Air Lines (DAL).
Elsewhere in economic news, there are minutes from the Fed's March meeting and a consumer sentiment update on the schedule.
Discuss the rate
While the Fed maintained its forecast to cut interest rates three times this year at its last meeting, there is growing debate about whether the central bank will make smaller cuts — or even postpone them altogether.
On Thursday, Minneapolis Fed President Neel Kashkari indicated that the Fed may not cut interest rates at all this year if the progress of inflation stalls. After the March jobs report showed that the labor market remains remarkably resilient, Torsten Slok, chief economist at Apollo Global Management, said the report was in line with his previous call for no cuts this year. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
“We stand by our view that the Fed will not cut rates this year,” Slok wrote in a note to clients.
Others believe Friday's data showed some positive developments on the supply side of the labor market, helping strengthen the argument that a strong labor market and wage growth will not necessarily lead to higher inflation.
“We see the report as supporting Chairman Powell’s view that the Fed could begin a cautious and gradual easing cycle later this year — as long as incoming data on inflation show “An improvement.” Friday.
Check price
Next week will provide another update to the inflation story with the release of the CPI for March on Wednesday. After some noted that seasonal effects could have caused flat inflation readings to begin this year, economists will be watching closely to see if inflation returns to its downward trend in March.
Wall Street expects a 3.5% annual increase for the headline CPI, which includes food and energy prices, a notable increase from the headline figure of 3.2% in February. Prices are expected to rise 0.4% month-on-month, in line with February's rise.
On a “core” basis, which excludes food and energy prices, inflation is expected to rise by 3.7% year-on-year, a slowdown from the 3.8% increase seen in February. Monthly increases in core prices are expected to reach 0.3%, slower than the 0.4% increases seen in January and February.
“The March CPI report will be a key indicator of whether the pick-up in inflation at the start of 2024 was the result of early-year hype or whether inflation's journey to the Fed's target has extended meaningfully,” said Sarah Fargo, chief economist. House wrote in a note to clients. “We think it will show hints of both dynamics at play.”
The new earnings season begins
Delta is scheduled to report earnings Wednesday before the bell, an appetizer for investors before a slew of the nation's largest financial institutions, including JPMorgan, officially kick off its first-quarter reporting season on Friday.
Overall, Wall Street expects the first quarter to set the tone for a strong year of earnings growth among S&P 500 companies. The consensus expects first-quarter growth for S&P 500 companies of 3.2% compared to the previous year. For the full year, Wall Street sees S&P 500 earnings growth of 10.9%.
From a broad perspective, two main topics to watch are which sectors are seeing earnings growth and, as always, how company executives believe the current economic environment will impact the rest of their year.
Within the sector moves, Wall Street strategists will be closely watching whether earnings rise in areas outside of technology, where they recently helped lead an expanding stock market rally.
Part of that rally was fueled by the expectation that earnings will start growing among the 493 Standard & Poor's companies that were not part of the Magnificent Seven-led rally in 2023. Pinky Chadha, chief equity strategist at Deutsche Bank, believes there are signs of an earnings rotation . This quarter will start with huge growth and the technology will see slower earnings growth year over year compared to the previous quarter.
“We can always talk about price action and whether the rally is expanding, but ultimately it's about earnings and fundamentals,” Chadha told Yahoo Finance. “We think that outside of big tech, you'll see a recovery in earnings growth, while for big tech you'll basically see earnings growth start to slow.”
While Chadha does not expect the moment the earth falls He said technology earnings this quarter and slowing sequential growth in the sector offset by higher earnings in other sectors should “encourage” more rotation in the market.
Weekly calendar
Monday
Economic Data: New York Fed One-Year Inflation Forecast, March (previously 3.04%)
Earnings: No noticeable profits.
Tuesday
Economic Data: NFIB Small Business Optimism, March (90.0 expected, 89.4 previously)
Earnings: WD-40 (WDFC), Tilray (TLRY)
Wednesday
Economic Data: Consumer Price Index, Monthly, March (+0.4% expected, +0.4% previously); Core CPI, MoM, March (+0.3% expected, +0.4% previously); CPI, YoY, March (+3.5% expected, +3.2% previously); Core CPI, y/y, March (+3.7% expected, +3.8% previously); Real average hourly earnings, year-over-year, March (+1.1% previously) MBA Mortgage Applications, week ending April 5 (-0.6%); Minutes of the Federal Open Market Committee meeting
Earnings: Delta Air Lines (DAL), Runway Rental (RENT)
Thursday
Economic Data: Initial Jobless Claims, Week Ending April 6 (previously 221,000); Producer Price Index, Monthly, March (+0.3% expected, +0.6% previously); Producer Price Index, YoY, March (+1.6% previously)
Earnings: CarMax (KMX), Brand Constellation (STZ)
Friday
Economic Data: Import Prices, Monthly, March (+0.4% expected, +0.3% previously); Export Prices, Monthly, March (+0.1% expected, +0.8 previously); University of Michigan Consumer Confidence, preliminary reading for April (80.0 expected, previous 79.4);
Earnings: BlackRock (BLK), Citigroup (C), JPMorgan (JPM), Progressive (PGR), State Street (STT), Wells Fargo (WFC)
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”