What to see in markets, week 31 May
A rise in US equities last week cut off a seven-week losing streak for the S&P 500 and Nasdaq, while the Dow recorded gains for the first time in eight weeks.
These gains ended the longest weekly losing streak of more than a decade for the S&P 500 after the index tipped into bear market territory. All three major indices recorded weekly gains of at least 5%, supported by a number of positive economic data and more positively received earnings reports from the retail trade.
The S&P 500 has taken a series of losses of this length only three other times in history – 1970, 1[ads1]980 and 2001 – and twice the index rose 33% over the next 12 months, according to data from LPL Financial.
“Of course, to keep things honest, [performance after] the [decline] in 2001 was tough sledding, ”pointed out LPL’s Ryan Detrick; over the next 6 months, the S&P 500 fell another 14%.
Wall Street will be shut down on Monday in observance of Memorial Day holiday.
Investors are expected to take the signal from a wealth of important employment data in the last week of May, which was shortened by the holiday, when trading resumes on Tuesday.
The Department of Labor’s closely monitored job report will provide a snapshot of US employment as concerns increase about the uncertainty in the economic outlook. May’s job data is expected to reflect a decline in hiring from a red-hot previous reading of 428,00 jobs, with economists looking for 325,000 jobs added or created last month, according to consensus Bloomberg estimates.
With a number of big-name companies reporting inflation-related earnings pressures and having seen their shares fall in recent weeks, market participants have become skeptical that companies can lay off workers and stop hiring to cut costs.
On the employment front, investors also have ADP’s report on private payrolls – a precursor to the government’s main report on jobs – the Ministry of Labor’s survey on job openings and turnover, or JOLTS, and weekly demands for queue unemployment.
The consumer confidence index through Tuesday will serve as another important measure of economic sentiment, with investors keeping an eye on consumer resilience amid continued talk of recession.
In recent trading days, a favorable group of quarterly results from large traders has helped to at least temporarily allay concerns that inflationary headwinds could take on profit margins.
“Based on their incomes, along with other trends such as declining consumer confidence and real incomes, the consumer suddenly looked much more vulnerable,” said Brad McMillan, chief investment officer of the Commonwealth Financial Network, in a note. “As the consumer goes, so does the economy and ultimately the market.”
In fact, if the company’s forecasts hold true, macroeconomic pressures are likely to appear more meaningful in the second quarter results.
The term “inflation” was mentioned at least once during 398 revenue talks held by S&P 500 companies from March 15 to May 24, FactSet research indicated, with a similar number – 338 – mentioning the “supply chain” in about the same period .
In addition, the S&P 500 reported earnings growth of 9%, the lowest since the fourth quarter of 2020, and 68 companies followed by the index gave negative EPS guidance for Q1, the highest since the end of the 2019 quarter, per set of facts.
“If the economy approaches the door of recession, layoffs will increase further, and it is too early to rule out more staff cuts in the weeks and months ahead,” FWDBONDS chief economist Christopher Rupkey said in a recent note. “High-flying technology companies have seen their stock prices plummet, which will force management to tighten their belts, and the biggest expense for most companies is always labor.”
The earnings season is coming to an end, but several reports will come during the four-day week, with companies such as Salesforce.com (CRM), GameStop (GME) Chewy (CHWY) and HP (HPQ) reporting quarterly results.
“This is nothing more than a bear bounce in our opinion,” Eddie Ghabour, co-founder and CEO of Key Advisors Group, told Yahoo Finance Live. “When you look at these returns we have had, they have been at a very light volume, there is not much conviction.
Ghabour also elaborated that data that has resulted in steep cross-share sales in recent weeks was data from the first quarter, and that the figures for the current quarter may be worse, warning of a “very treacherous market in the coming months.”
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Financial calendar
Monday: Memorial Day. No notable reports are scheduled for release.
Tuesday: FHFA house price indexmonth-over-month, March (2.0% expected, 2.1% last month); Purchasing index for house pricesquarter-over-quarter, Q1 (3.3% in previous quarter); S&P CoreLogic Case-Shiller 20-City Compositemonth-over-month, March (1.90% expected, 2.39% last month); S&P CoreLogic Case-Shiller 20-City Compositeyear-over-year, March (19.85% expected, 20.20% last month); S&P CoreLogic Case-Shiller US National Home Price Indexyear-over-year, March (19.80% last month); MNI Chicago PMIMay (55.5 expected, 56.4 over last month); Conference Board Consumer ConfidenceMay (103.5 expected, 107.4 last month); Conference Board Current situationMay (152.6 during last month); The conference board’s expectationsMay (77.2 during previous reading); Dallas Federal Reserve’s manufacturing activityMay (1.5 expected, 1.1 during last month)
Wednesday: MBA loan applicationsweek ended May 27 (-1.2% last week); S&P Global US Manufacturing PMIMay final (57.5 expected, 57.5 during last month); Construction costsmonth-over-month, April (0.6% expected, 0.1% last month); ISM ManufacturingMay (54.5 expected, 55.4 over last month); ISM prices paidMarch (80 expected, 84.6 last month); ISM new ordersMay (53.5 last month); ISM EmploymentMay (50.9 last month); JOLTS vacanciesApril (11,400 million expected, 11,549 million during last month); WARDS Total vehicle salesMay (14.30 million expected, 14.29 million last month); The Federal Reserve publishes beige book
Thursday: Challenger Job Cutsyear-over-year, May (6.0% last month); ADP Employment ChangeMay (300,000 expected, 247,000 during last month); Non-farm productivityQ1 last (-7.5% expected, 7.5% last month); Unit labor costs Q1 final (11.6% expected, 11.6% final); Initial unemployment requirementsweek ended May 28 (210,000 expected, 210,000 during last week); Continued requirementsweek ended May 21 (1.346 million expected, 1.346 million last week); Factory orders excluding transportApril (2.5% last month, revised to 2.1%); Factory ordersApril (0.7 expected, 2.2% last month, revised to 1.8%); Durable goods ordersApril final (0.4% expected, 0.4% last month); Durable goods except transportApril final (0.3% last month); Orders for non-defense capital goods other than aircraftApril final (0.3% last month); Non-defense shipments of capital goods other than aircraftApril final (0.5% expected, 0.8% last month)
Friday: Change in Nonfarm PayrollsMay (325,000 expected, 428,000 during last month); Change in private payrollsMay (303,000 expected, 406,000 during last month); Change in production payrollsMay (37,000 expected, 55,000 during last month); UnemploymentMay (3.5% expected, 3.6% last month); Average hourly earningsmonth-over-month, May (0.4% expected, 0.3% in previous month); Average hourly earningsyear-over-year, May (5.2% expected, 5.5% last month); Average weekly time for all employeesMay (34.6 expected, 34.6 over last month); Labor force participationMay (62.3% expected, 62.2% last month); Underemployment ratesMarch (7.0% last month); S&P Global Manufacturing PMIMay final (53.5 expected, 53.5 during last month); S&P Global US Composite PMIMay final (53.8 expected, 53.8 over last month); ISM Services Index (56.5 expected, 57.1 in the last month)
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Income calendar
Monday
Memorial Day. No notable reports are scheduled for release.
Tuesday
Before the market opens: Kirklands (KIRK)
After market closure: HP (HPQ), Salesforce.com (CRM), Victoria’s secret (VSCO), ChargePoint (CHPT), Ambarella (AMBA)
Wednesday
Before the market opens: No notable reports are scheduled for release.
After market closure: GameStop (GME), Sticky (YOU), PVH (PVH), Hewlett Packard Enterprises (HPE), Clean storage (PSTG), American super conductor (AMSC)
Thursday
Before the market opens: Hormel Foods (HRL)
After market closure: Lululemon (LULU), Okta (OCT)
Friday
No notable reports are scheduled for release.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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