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Top 5 Things to Watch in Markets in the Week Ahead

EconomyMay 01, 2022 07:03AM ET
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© Reuters.

By Noreen Burke

Investing.com -- With the Federal Reserve almost certainly set to deliver a half-percentage-point rate hike at its upcoming meeting on Wednesday, investors will be awaiting further insights on its next steps to combat surging inflation. The labor market is another key part of the Fed’s mandate and Friday’s U.S. employment report is expected to show that jobs growth remained robust in April. Earnings will continue to roll in as investors contemplate what was the worst month for stocks in more than two years. Meanwhile, the Bank of England is expected to deliver its fourth rate hike in a row, one day after the Fed, on Thursday. Here’s what you need to know to start your week.

  1. Fed rate hike

With a half-percentage-point rate hike by the Fed already baked in, investors will be focusing on signals from Fed Chair Jerome Powell at his post-policy meeting press conference on the future path of interest rates, plans for reducing its almost $9 trillion balance sheet and the Fed’s view on when inflation may peak.

Many investors and analysts believe the Fed will continue to surprise on the hawkish side as it attempts to contain the worst inflation in four decades, fueling concerns that aggressive monetary tightening could trigger a recession.

The view of Fed policymakers on how persistent the current pace of inflation is expected to remain will be critical to future monetary policy tightening plans.

“If the Fed continues to expect high levels of inflation and they don’t see it moderating in the future, that will be a concern for investors," Michael Arone, chief investment strategist at State Street Global Advisors, told Reuters.

"It will mean that the Fed will continue to raise rates and tighten monetary policy, which the market is expecting, but maybe even more aggressively."

  1. Nonfarm payrolls report

Friday’s nonfarm payrolls report is expected to show that the U.S. economy added 380,000 jobs in April, while the unemployment rate is expected to tick down to 3.5%. Average hourly earnings are expected to post another solid increase.

The jobs report comes on the heels of data last Thursday showing that the U.S. economy unexpectedly contracted in the first quarter, but the decline was largely driven by a wider trade deficit as imports surged, and a slowdown in the pace of inventory accumulation. Domestic demand remained robust, allaying fears of a recession.

But the outlook for the economy continues to be clouded by concerns over the economic impact of the war in Ukraine, rising bond yields, new coronavirus lockdowns in China that could stymie improvements in global supply chains, and more aggressive monetary policy tightening by the Fed.

  1. Earnings reports

Earnings season is set to continue with investors watching reports from Pfizer (NYSE:PFE), Starbucks (NASDAQ:SBUX), Airbnb Inc (NASDAQ:ABNB), and ConocoPhillips (NYSE:COP) during the week, among others.

The month of April marked the S&P 500's biggest monthly fall since the onset of the coronavirus pandemic in early 2020, while the tech-heavy Nasdaq logged its largest monthly drop since the 2008 financial crisis.

Downbeat results and worries about aggressive monetary policy tightening by the Fed hammered mega-cap technology and growth stocks.

The selloff accelerated on Friday as the S&P 500 tumbled 3.6% -- its biggest one-day drop since June 2020 -- following a disappointing earnings and guidance from Amazon (NASDAQ:AMZN) that sent the e-commerce giant's shares down 14%.

  1. Economic data

Aside from the Fed meeting, earnings and the April jobs report, the economic calendar features several key economic reports in the coming week, including the ISM manufacturing and services PMIs on Monday and Wednesday, respectively. Solid readings here would likely underline the view that the economy will expand in the second quarter, keeping Fed tightening plans on track.

The report on JOLTS jobs openings is due on Tuesday, followed a day later by the ADP nonfarm payrolls figures. The Labor Department is to publish the weekly report on initial jobless claims on Thursday ahead of Friday’s nonfarm payrolls data.

  1. Bank of England meeting

The Bank of England is widely expected to deliver its fourth straight rate hike when it meets a day after the Fed on Thursday, the first time it would have done that since 1997.

BoE Governor Andrew Bailey has said the bank is treading a "very tight line" between curbing inflation, which at 7% is more than three times its target, and avoiding a recession.

A quarter-point hike to 1% would meet a precondition for the BoE to start actively selling bonds it holds.

Active bond sales would tighten monetary conditions but could hurt a faltering economy and no major central bank has yet started the process.

--Reuters contributed to this report

Top 5 Things to Watch in Markets in the Week Ahead
 

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Comments (16)
Marco cuevas
Marco cuevas May 02, 2022 6:38AM ET
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With a half-percentage-point rate hike by the Fed already baked in.....SURE SURE So we are to gonna see a drop on WED right https://investing.com
Rise Unlimited
Rise Unlimited May 01, 2022 10:09PM ET
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It was a Bill pump and dump and it just wemt to Ukraine. .25 vs .50 May is next
Andrew Allen
Andrew Allen May 01, 2022 1:13PM ET
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the photo for the article is hysterical "Powell: Economy is doing very well" Doesn't anybody know our GDP shrunk last quarter? We may already be in recession. Bad news is always ignored by these 🤡🤡 as they have become more and more desperate
jason xx
jason xx May 01, 2022 1:13PM ET
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No it simply went down to 1.4% not -1.4%. Core data also proved inflation has peaked yet you ignore that. You are worse then the people you criticize.
Andrew Allen
Andrew Allen May 01, 2022 1:12PM ET
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the photo for the article is hysterical "Powell: Economy is doing very well" Doesn't anybody know our GDP shrunk last quarter? We may already be in recession. Bad news is always ignored by these clowns as they have become more and more desperate
Julian Ford
Julian Ford May 01, 2022 12:19PM ET
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Baked in?!! Havemt every basis been baked in? Thats what been said everytime jerome powl soons to speak. But, yet to fall another %5 the day before he speaks
William Bailey
William Bailey May 01, 2022 12:13PM ET
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5: Can the fed print, will the fed print, are their enough treasuries to print, will the fed reverse the puny interest rate hije of 1/4 and will the Fed go to negative rates in this massivly infkationary time … to save an index for anotber few months and destroy everything ?????
jason xx
jason xx May 01, 2022 12:13PM ET
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Only the treasury prints
Ellen Mitchell
Ellen Mitchell May 01, 2022 11:17AM ET
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A trade deficit will only grow as the dollar remains eerily high.  Maybe the US should rethink its open market attitude with some level of restrictions like China and Japan.  NAFTA was deadly for American jobs  and factories.
First Last
First Last May 01, 2022 11:17AM ET
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The retrumplican anti-vaxxers getting unemoployment instead of getting vaxxed & back to work doesn't help.
Jerry Weber
Jerry Weber May 01, 2022 11:17AM ET
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First Last you cant give out money like theres an endless supply, especially with inflation getting higher. Sending money to other countries, trying to reduce college debt, all on the backs of tax payers! This increases inflation. This administration wants people to rely on them. Thats how they gain control. Economists figured out the stimulus and wage hikes in before they authorized them to happen. Now they government is acting like its a mystery! I call BS it’s all by design to get “your” money!
jason xx
jason xx May 01, 2022 11:17AM ET
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Did you not hear about the LNG deal? Many deals like that coming.
jason xx
jason xx May 01, 2022 11:17AM ET
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What would you have use do? Allow Ukraine to be conquered to save a few bucks on gas. If that is your attitude you don't deserve to live in this country.
Çağatay Çakır
Çağatay Çakır May 01, 2022 10:54AM ET
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Never ever listen the pawn economists always look at the credits and banks
Çağatay Çakır
Çağatay Çakır May 01, 2022 10:52AM ET
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They have just said 50 points will be on the table but every stupid manipulator says 50p is certain. No, its 25bps. 50 will ****credits
First Last
First Last May 01, 2022 10:52AM ET
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If you think 25 bps, then you shout go all in on long bonds.
Chad Richer Than You
Chad Richer Than You May 01, 2022 10:33AM ET
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Watch Jerome get shot in the week ahead
Millennial Stacker
Millennial Stacker May 01, 2022 10:33AM ET
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That would make me so happy
First Last
First Last May 01, 2022 10:33AM ET
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What about the guy who made Jerome the Chair?
 
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