Next week promises any debt deal relief may prove short-lived with jobs report, Fed decision looming
by trendswire · 27 May 2023
As signs in Washington point to an eventual deal to raise the nation’s debt ceiling, the thinking on Wall Street is that any euphoria from such a deal may have already happened, or will be short-lived over the four days of negotiation shortened by the holiday next week. Similarly, once the immediate euphoria surrounding Nvidia’s second-quarter forecast and enthusiasm for all things AI dies down, attention will turn to next Friday’s reading in nonfarm payrolls for the month of May (the estimate compiled by Dow Jones sees 188,000 new jobs), the upcoming Federal Reserve policy meeting on June 13-14, and the persistent fact that many stocks fail to launch. The latest fear in the trading rooms is that the economy has proven so resilient of late, with inflation slowly coming down, the Fed may raise rates another quarter point, if not at the June meeting, then at the next one on the 25th. to July 26. The Atlanta Fed’s GDPNow model estimate for real gross domestic product growth in the second quarter recently stood at 1.9%, while the CME FedWatch Tool late Friday showed a nearly 67% chance. the Fed raises another quarter point in June and raises the fed funds rate. at 5.25% at 5.50%. There is even a 25% chance that the rate will be 5.50% to 5.75% by the end of the July meeting, according to the CME. Part of the move could be related to sentiment surrounding the debt ceiling discussions. To top it off, June is usually a lousy month for stocks in any case, never mind the machinations in Washington or the fortune-telling of the Federal Reserve’s tea leaves. “The reason June is usually a weak market is due to the fact that we are in Q1 earnings season, which means companies are relatively quiet, leaving investors mostly dependent on political news. , which is often a risk to the market,” said Jay Hatfield, chief executive of Infrastructure Capital Management. “The overhangs on the market this year [are] the debt ceiling negotiation, aggressive comments from the Fed and a banking crisis. It looks like we’re going to get a debt ceiling deal over the weekend, which should help the market stabilize.” The Nasdaq Composite, up about 2.5%, and the S&P 500, up a 0.3% gain, masks so much weakness below the surface.% and 3.2% this week, and the Dow Industrials down 1%.Though the S&P 500 is 9.5% higher over the As of 2023, only a few stocks are doing well.” The number of stocks trading above their 200-day moving average has been declining since mid-April,” Liz Young, SoFi’s head of investment strategy, wrote in a blog post on Thursday. “Despite the market rally over the past month and the turnaround, the strength below the surface has actually deteriorated.” All of that comes at what is a seasonally tense time of year for stocks, regardless. [in June] has been lukewarm for [the] DJIA and S&P 500,” wrote Christopher Mistal of Stock Trader’s Almanac this week, though he noted that performance in years like this, leading up to the presidential election, has tended to be stronger. The 11th strongest month of the year for the Dow Industrials, 9th strongest for the S&P 500 and Russell 1000 and 7th strongest for the Russell 2000. “The ‘summer rally’ in most years is the weakest rally of all four seasons” , says the almanac. Unfortunately, the market backdrop “remains cautious and is still bracing for more sideways action and a possible pullback or correction during the weak summer months, especially after mid-July in the worst two months of the year.” : August and September,” the almanac’s editor-in-chief Jeffrey Hirsch wrote Thursday. Next Week’s Schedule Tuesday 9 a.m., Hewlett Packard Enterprise Wednesday 8:45 a.m.: Fed Governor Michelle Bowman’s Speech 9: 45am: Chicago PMI (May) 10am: JOLTS (April) 1:30pm: Fed Governor Philip Jefferson Speech 1:30pm: Philadelphia Fed President Patrick Harker Speaks Earnings: Advance Auto Parts, Salesforce, NetApp, Raymond James, Donaldson, Capri Holdings, Nordstrom, PVH Corp., CrowdStrike, Okta Thursday 8:15am: ADP Private Payroll Report (May) 8:30am: Initial Claims (week ending May 27) May) 9:45 a.m.: S&P Global Manufacturing PMI (May) 10 a.m.: ISM Manufacturing (May) 1 p.m.: Fed’s Harker Speaks Earnings: Dollar General, Broadcom, Cooper Companies, Paychex, Macy’s, Five Below, C3.ai, Lululemon, Zumiez Friday 8:30 am: US Jobs Report (May) — CNBC’s Samantha Subin, Fred Imbert and Michael Bloom contributed to this report.