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Dow Jones, Nasdaq, S&P 500 weekly preview: FOMC in focus after strong jobs report

Published 06/10/2024, 07:07 AM
© Pavlo Gonchar / SOPA Images/Sipa via Reuters Connect
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The S&P 500 ended Friday flat, despite hitting a record-high intraday, buoyed by a stronger-than-expected jobs report.

The broad market index dipped 0.11% to close at 5,346.99, after reaching an all-time high earlier in the session. The Dow Jones Industrial Average fell 87 points to 38,798.99, and the Nasdaq Composite slipped 0.23% to end at 17,133.13.

Despite the slight declines, all three major indices recorded gains for the week. The Dow rose 0.29%, the S&P 500 gained nearly 1.32%, and the Nasdaq advanced 2.38%.

Stocks initially faced pressure following the release of robust May jobs data, which pushed the yield on the benchmark 10-year Treasury up by more than 15 basis points.

Markets will now shift their focus to the several key economic data releases due this week, most notably the Consumer Price Index (CPI) report on Wednesday and the Producer Price Index (PPI) report on Thursday.

Moreover, the June Federal Open Market Committee (FOMC) meeting is also scheduled for Wednesday, followed by a post-meeting statement and Chair Jerome Powell’s press conference.

“As discussed in our FOMC preview, we continue to expect the first rate cut in September, by which point we expect to have seen five straight months of better inflation news,” Goldman said in a Sunday note.

“After September, we expect quarterly rate cuts to a terminal rate of 3.25-3.5%. This implies a second cut in December for a total of two cuts in 2024, four more in 2025, and two more in 2026,” they added.

Oracle, Broadcom, Adobe due to report earnings

The Q1 reporting season is nearly over, but there are several important reports due for release, especially this week.

The three most anticipated earnings reports in the coming days are from Oracle Corporation (NYSE:ORCL), Broadcom Inc (NASDAQ:AVGO), and Adobe Systems Incorporated (NASDAQ:ADBE). Beyond their individual performances, these reports will provide further insights into the broader AI sector, which remains the single most important driver of US equities.

For Broadcom, a key semiconductor player, analysts at Susquehanna project “n-line to slightly better results as continued AI growth, optimization of the VMware (NYSE:VMW) portfolio, and perhaps improving Storage should be offset by ongoing softness in Broadband and Enterprise Networking.”

Two other reports that will likely draw attention this week are from GameStop (NYSE:GME) and Signet Jewelers (NYSE:SIG).

What analysts are saying about US stocks

Bank of America: “Stronger growth is better as long as inflation remains in check, and we expect a strong 2H acceleration in EPS – see the Earnings Tracker report. The worst case of weak NFP and hot CPI has also been avoided, at least for now. And despite some concerns, recent macro weakness suggests that growth is simply “normalizing” – see our Mid-year outlook report. If macro starts to improve, equities should be able to withstand higher levels of inflation. If NFP was just a head-fake and macro slows, inflation would have to come down to support stocks, and it likely will. If CPI cools despite hot NFP, it’s risk on.”

Morgan Stanley: “With macro data still mixed on both growth and inflation, a quality bias should continue to do well, in our view. We continue to fade small caps and lower quality stocks, which both underperformed late last week. EPS growth for the S&P 500 is beginning to pick up, in line with our base case view.”

Goldman Sachs: “NVIDIA Corporation (NASDAQ:NVDA) became the 2nd largest stock in the S&P 500 this week, with its share price surpassing $1,200. The company recently announced a 10-for-1 stock split set to take effect after today’s close. Many equity investors have inquired about the impact of corporate stock splits. Based on 45 Russell 1000 stock splits since 2019, share prices typically rose by 4% in the week after the announcement, but prices did not evidence a clear reaction in subsequent weeks or around the effective date. One theory for the announcement effect is increased liquidity. However, we find that liquidity showed little change after the split took effect. Retail trading activity increased only slightly, though there were notable exceptions.”

RBC Capital Markets: “The S&P 500 could move to the 5,100 level at year-end 2024 if our 2024 EPS forecast of $237 proves accurate, or nearly 5,300 using bottom-up consensus EPS (which was $244.90 as of early June). This output reflects the idea that moderating inflation and a bit of interest rate relief can keep the P/E multiple of the stock market higher than many investors have believed is possible.”

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