As investors bid farewell to a week marked by a Federal Reserve meeting, surprising labor market data and the latest corporate earnings, they still have to figure out what it all means for a stock market that is still deciding where it wants to go. All three major market indexes ended the week higher after Friday’s rally, fueled by weaker-than-expected jobs data in April that pushed up unemployment slightly and pushed government bond yields lower – rekindling hopes that interest rates will rise next year valleys. all. That helped fuel the market’s recovery from the three-week correction that sent the S&P 500 down 5.5% from an all-time high in late March to a mid-April low. The Nasdaq Composite rose about 1.4% this week, the Dow Jones Industrial Average rose 1.1% and the S&P 500 rose 0.6%. The Fed and economic policy were at the top of the agenda this week, given the central bank’s decision on Wednesday to leave interest rates unchanged again as they have been since last summer. Chairman Jerome Powell reassured traders by saying the central bank’s next move is unlikely to raise rates, although the three major stock averages ended the day mixed. Central bank officials continue to say their policy moves depend on the path of inflation, while also noting little recent progress in curbing price increases. But the Fed won’t see any new inflation data next week, leaving unanswered the question of whether prices are actually cooling enough to warrant a change in stance. “The market is in a bit of disarray,” said Larry Tentarelli, founder of the Blue Chip Daily Trend Report. “Investors may be in a bit of a gray area because we don’t know what to expect.” Bond yields fell on Friday after the latest payroll report. Ten-year Treasury yields ended the day at around 4.50% after breaching 4.6% earlier this week, while two-year Treasury yields fell to around 4.81% after breaching the 5% mark . “Markets were concerned that economic growth was too strong and that progress on inflation was stalling,” said David Donabedian, chief investment officer of CIBC Private Wealth. “This report leans the other way and makes both the stock market and the bond market very happy.” With the age-old “sell in May and go away” adage in mind, investors have wondered whether the recent weakness is part of a short-term consolidation or the start of a larger downturn. But many professionals note that this correction phase is normal in the context of a market that reached new all-time highs just five weeks ago. This week included the close of April’s trading month, which marked the first down month of the year for all three major market averages. It also marked the worst monthly performance for the Dow Jones since September 2022. While the three major indexes remained down in the second quarter, they are all up this year. And this week’s eleventh-hour rally raises questions about whether the market has regained its momentum. “Investors are now wondering if the pullback we experienced from March 28 through April 19 has ended,” said Sam Stovall, chief investment strategist at CFRA Research. “There is still the possibility that the market will experience a somewhat deeper decline, but certainly not a deep correction or even the start of a new bear market.” It’s fair to say that some recent earnings reports have raised doubts about the economy, with brands like McDonald’s and Starbucks showing signs of consumer tension. Rate debate Stovall said traders were breathing a “sigh of relief” after Powell’s comments that the central bank’s next move is unlikely to raise rates. But that didn’t answer the question on Wall Street’s mind: When will the cost of borrowing actually start to decline? Economists’ forecasts vary widely on the number of cuts this year: Citigroup sees four; Bank of America only one. However, according to CMEGroup’s FedWatch tool, Friday’s “cool jobs” report has put the possibility of a rate cut back in play as early as September. Even in a longer-term environment, the fact that the economy is still growing and contributing to earnings growth provides reasons to be optimistic, said Tom Hainlin, senior investment strategist at US Bank Wealth Management. “To us, this speaks to an environment where we think equities are marginally outperforming bonds,” he said. While no new inflation figures are scheduled for next week, investors will see reports on March wholesale inventories, March consumer credit and May consumer confidence from the University of Michigan. “Next week will actually be very quiet on the economic calendar,” Tentarelli said. No major releases “might be nice for a change.” AI Trading While interest rates took center stage this week, investors also continued to monitor companies involved in the artificial intelligence boom amid recent stock market turmoil. Super Micro Computer fell nearly 9% this week after missing fiscal third-quarter revenue expectations. But Nvidia, the dominant AI name, was able to get into the green with Friday’s rally, sending it 1.2% higher this week. Despite this week’s mixed action, both are posting huge gains this year. CFRA’s Tentarelli and Stovall both said investors should hold on to their AI positions regardless of any price swings after the sector’s massive run. “I think the AI business has plenty of fuel in the tank in the longer term,” Tentarelli said. While about four out of five S&P 500 companies have already reported profits, major names like Disney, Uber and Lyft will arrive next week. According to FactSet, about 79% of companies that have posted results to date have exceeded Wall Street expectations. Week Ahead Calendar All Times ET. Monday, May 6 No significant economic data Earnings: Loews, Spirit Airlines, Tyson Foods, BioNTech, Hims & Hers, Vertex Pharmaceuticals, Lucid Group, Palantir Technologies, Simon Property Group, Aecom, Microchip Technology, Rocket Lab, Goodyear Tire, Flavors & Fragrances , Marriott Vacations, Noble Corp., Vornado Realty, Coty, BellRing Brands, Cabot Tuesday, May 7 3:00 PM Consumer Credit (March) Earnings: UBS, BP, Nintendo, Squarespace, Kenvue, Aramark, Gogo, Energizer, Tempur Sealy , Bloomin’ Brands , Crocs, Datadog, Duke Energy, Rockwell Automation, Spirit AeroSystems, TransDigm, Expeditors, Nikola, Walt Disney, Ferrari, GlobalFoundries, NRG Energy, Perrigo, Electronic Arts, Cirrus Logic, iRobot, Redfin, Lyft, TripAdvisor, Adaptive Biotech, Arista Networks, Dutch Bros., Kyndryl, Marqeta, Oddity Tech, Olo, Sonos, Toast, Upstart Holdings, Virgin Galactic, Twilio, IAC/InterActive, Match Group, McKesson, Rivian Automotive, Brighthouse, Occidental Petroleum, Assurant, Angi, Kinross Gold , Astera Labs, Diamond Offshore, Reddit Wednesday May 8 10am Wholesale Stocks (March) Wins: Anheuser-Busch InBev, Edgewell Personal Care, Embraer, Elanco Animal Health, United Parks & Resorts, ODP, Emerson Electric, Brookfield, New York Times, Performance Food Group, Reynolds Consumer Products, Shopify, Teva Pharma, Uber Technologies, Brink’s, Tegna, Hain Celestial, Choice Hotels, Dine Brands, Liberty Broadband, Affirm Holdings, Fox Corp., Cushman & Wakefield, Liberty Media, Valvoline, Arm Holdings , Airbnb, Robinhood, Beyond Meat, Bumble, Kodiak Gas Services, NuSkin, SolarEdge Technologies, TKO Group, Vizio, AMC Entertainment, Cheesecake Factory, News Corp., Toyota Motors, Celanese, Instacart, Klaviyo Thursday, May 9 8:30 am Continued Unemployment Claims 8:30 a.m. Initial Claims Revenue: Nissan, Cedar Fair, Six Flags, Yeti, Hanesbrands, Planet Fitness, Sally Beauty, Tapestry, US Foods, Warby Parker, Krispy Kreme, Hyatt Hotels, Warner Bros. Discovery, Roblox, Viatris, Papa John’s, Hilton Grand Vacations, Warner Music Group, Solventum, Dropbox, Akamai, Figs, Sweetgreen, Unity Software, Yelp, Synaptics, H&R Block, Iamgold, Fidelis Insurance, Gen Digital, Savers Value Village Friday, May 10 10 a.m. Michigan sentiment (May) 2 p.m. Treasury budget (April) Wins: Honda Motor, AMC Networks
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Interest rates and AI rally remain top priority for investors next week
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