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Traders will be looking for any hints to the timing of rate cuts. (0:17) Apple and Amazon lead the earnings parade. (2:06) Elon Musk makes surprise visit to China. (4:12)
The following is an abridge transcript:
It’s a big week on the economic and earnings fronts with a Fed meeting, the April jobs report as the last of the Magnificent 7 results.
The Federal Open Market Committee start its two-day meeting on Tuesday with the rate decision on Wednesday. That’s a foregone conclusion as far as the markets are concerned. Fed funds futures are pricing in a 98% chance that rates stay at 5.25%-5.5%.
So, all attention will be on any change in the statement and what Fed Chairman Jerome Powell has to say at his press conference.
Friday’s in-line rise in the core PCE price index – the preferred inflation measure of the FOMC – eased some worries about stagflation sparked by the weak Q1 GDP report. But there are still bound to be some questions put to Powell about it.
Clark Bellin, president and CIO at Bellwether Wealth, says: "Friday's PCE print keeps rate cuts on the table for 2024, but we expect any rate cuts to come towards the end of the year, which will allow the Fed to analyze a few more inflation reports to ensure that the re-acceleration of inflation over the past few months was indeed a temporary uptick and not something more sustainable."
"The market has been too optimistic about the speed and quantity of rate cuts and these high levels of inflation make it very difficult to justify an interest rate cut anytime soon."
Be sure to check out Seeking Alpha’s analyst roundtable on when the Fed will start to cut rates. I’ll put that link at the top of Show Notes.
The jobs report hits Friday as usual. Economists expect that nonfarm payrolls rose by 250,000, with the unemployment rate steady at 3.8% and average hourly earnings up 0.3%.
Stephen Gallagher, head of Americas research at Societe Generale, is expecting strong employment numbers.
"We have projected strong readings, and the reports have substantially exceeded expectations so far this year," he said. "Gains are widespread, but they are particularly notable in government, education, and healthcare sectors. These are service-sector jobs that require on-site staffing."
In earnings, Amazon (AMZN) and Apple (AAPL) are the headliners. Amazon reports on Tuesday, while Apple weighs in on Thursday.
SA analyst Christopher Robb says Apple's valuation remains attractive compared to its peers, and its growing services business helps offset potential hardware slowdowns. Data from Counterpoint Research showed that Apple's smartphone shipments in China tumbled 19% in the first fiscal quarter of 2024.
Among other notable earnings this week
On Monday NXP Semiconductors (NXPI), ON Semiconductor (ON), MicroStrategy (MSTR) and Domino's (DPZ) report results.
Along with Amazon on Tuesday, Eli Lilly (LLY), Coca-Cola (KO), AMD (AMD), McDonald's (MCD), Starbucks (SBUX), PayPal (PYPL) and Super Micro Computer (SMCI) weigh in.
CVS Health (CVS), Qualcomm (QCOM), Pfizer (PFE), Kraft Heinz (KHC), Mastercard (MA), Marriott (MAR), MetLife (MET), MGM Resorts (MGM), eBay (EBAY) and DuPont (DD) are due Wednesday.
Shell (SHEL), CononoPhillips (COP), Amgen (AMGN), Booking Holdings (BKNG), and Fortinet (FTNT) join Apple.
Hershey (HSY), and Magna International (MGA) are up Friday
Looking to trading this week
Tony Pasquariello, head of hedge fund coverage at Goldman Sachs, says "the tactical path is still cloudy and my expectation is we’ll settle into a choppy range trade for the next phase of the game."
He prefers U.S. stocks vs. rest of world, large-cap over small-cap, high-quality over low-quality and cyclicals over defensives.
There "are times to go for the brake and there are times to go for the gas -- superficially, my instinct is equity people should be tapping the brakes, while macro people should be pressing the gas."
In the news this weekend
Paramount Global (PARA) plans to fire CEO Bob Bakish as early as Monday morning. That’s according to CNBC.
The company is scheduled to report its Q1 results Monday and, according to sources, Bakish will not join the earnings call, In his absence, Paramount’s division heads are expected to weigh in as the company negotiates a potential merger with Skydance Media. The exclusivity period on that deal expires on Friday.
Bakish reportedly failed to win over Paramount’s controlling shareholder, Shari Redstone, who wanted to oust the CEO before the company’s carriage negotiations with Charter Communications, a key condition for setting value in a deal with Skydance.
And Elon Musk arrived in Beijing Sunday for an unannounced visit. Musk planned to meet government officials to discuss the introduction of self-driving software to seek permission to move data outside China, Reuters reported.
The introduction of Full Self-Driving software in China would be a significant step as Tesla (TSLA) competes with local makers of electric cars.
For income investors
Morgan Stanley (MS) goes ex-dividend on Monday and UBS (UBS) goes ex-dividend on Tuesday. On Thursday, Norfolk Southern (NSC) goes ex-dividend. And Citi (C) goes ex-dividend on Friday.
And in the Wall Street Research Corner
Baird says short interest levels across stocks in the fashion and wellness industry has increased to 6.3%, the highest level since mid-November.
Urban Outfitters (URBN), e.l.f. Beauty, (ELF) and Ulta Beauty (ULTA) saw the largest increases in shares sold short in the last month. TJX (TJX), The Gap (GPS) and Birkenstock (BIRK) saw the largest decreases.
When it comes to percentage of the float, Kohl’s (KSS) had the highest short interest with 32.6% of the float. This was above the one-year average of 24.1%.
Kohl’s was followed by Revolve Group (RVLV) at 21.8% and The RealReal (REAL) at 19%.
