What a week to trade and invest. With the FED raising 25 bps as expected the market reacted with the usual volatility. The S&P 500 ($SPX) (SPY) whipped around on Wednesday afternoon and gapped up Thursday only to end the day down. Even with all that excitement it finished up 1.05% on the week.
In addition, there were a lot of high impact earning reports. There were a lot of top and bottom-line beats last week, but accompanying many of the calls was a revision down in future guidance. This led to more than a few stocks beating earnings but trading lower in the next session or two. This is something that could be very tradable in the remainder of the earnings reports. This week we have more earnings and more news on the horizon, so let's jump in and take a look at 5 things to watch in the markets this week.
Earnings
We once again have a smattering of earnings this coming week. Some of the bigger names include Merck (MRK), Advanced Micro (AMD), and Caterpillar (CAT) report on Tuesday. Paypal (PYPL), and CVS (CVS) are Wednesday, and the giants Apple (AAPL) and Amazon (AMZN) are Thursday. While all earnings are important to their respective holders, Amazon and Apple are pretty heavily weighted in the indexes so a miss or beat could have an outsized effect.
ISM Manufacturing PMI
This is a diffusion survey of purchasing managers and is often used as a leading indicator for economic health. There has been a pretty consistent contraction in the manufacturing industry for the previous 6 releases. While the US has a large amount of service-based businesses, a strong manufacturing sector often leads to more sustained economic improvement. If this comes in as a beat, it could be a sign that the FED still has some additional tightening to do before the economy meaningfully contracts. If this comes in lower or at estimates (46.9), then it could signal to the FED that the economy is contracting, and they can stop the right hikes.
JOLTS Job Openings
Another large talking point with the FED is often the “Robust Jobs Market”. They quote this is a reason that they need to tighten further. When openings are greater than searchers it's often described as a workers market. This would mean a worker has more leverage when changing jobs to get added pay or benefits because there is a lot of opportunity for them. If the Jobs market contracts thought it could point to a slowing economy which would be good in so far as the FED would begin to see a reason to start slowing rates. Due to this, it's possible that the market reacts positively if the JOLTS number is lower than expected. The opposite could also be the case, if the number comes out larger than estimated then the market could see some additional downside pressure and volatility.
OPEC Meetings
Tentatively set for Thursday is a joint meeting between OPEC and the JMMC to discuss energy markets, oil demand and supply, and possible cuts or additions to the oil supply. This is a closed meeting but there are reporters present for questions during the breaks as well as a formal announcement at the end of the meeting. If this has an impact on the market it will most likely be contained to the energy sector. This is still something that is worth watching as it could set the tone for oil prices in the near future.
Non-Farm Payrolls
Friday morning, before the market opens Non-Farm Payrolls, is reported by the BLS in the US. To some, this is the ultimate indicator of economic health because as the job market expands and contracts often so do spending habits. The last 6 releases have been mostly beats with the exception of the most recent report which was a miss. This could be important for the same reasons the JOLTS report is. If this shows additional contraction in the labor markets, it could be a reason for the Fed to start to wean off the rate hikes and move to either a pause or potential cuts.
Best of luck this week and don’t forget to check out my daily options article.
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On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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