Another packed week awaits investors as May kicks off with major announcements from the Federal Reserve, Apple (AAPL) and the April jobs report.
Before Monday morning’s opening bell, however, investors are expected to have a decision on the US government’s efforts to bail out ailing bank First Republic (FRC), with Yahoo Finance’s David Hollerith reporting on Saturday that a 12:00 p.m. deadline PM ET Sunday had been set for bank bids.
Yahoo Finance learned that JPMorgan Chase (JPM) and Bank of America (BAC), the country’s two largest banks, are among those weighing offers following a government takeover of the First Republic.
On Wednesday afternoon, the Fed will announce its latest monetary policy decision, which investors expect the central bank will hike rates by another 0.25% as it continues to fight stubborn inflation well above its 2% target. On Thursday after the closing bell, Apple will release its latest quarterly results. And before the markets open on Friday, the US government will release the April jobs report.
Elsewhere on the schedule, key updates on activity in the manufacturing and services sectors of the economy, as well as the latest job vacancy data, shed light on the business side of things.
On the earnings side, AMD (AMD), Starbucks (SBUX), Ford (F), Pfizer (PFE) and Uber (UBER) results will highlight the schedule.
Markets start the new month after a stable close in April. GDP data released on Thursday disappointed and Amazon (AMZN) results late Thursday cast doubt on the tech sector’s recovery. Still, all three major moving averages rose this week, with the tech-heavy Nasdaq rising 1.3%.
Year-to-date, the Nasdaq is up nearly 17%, while the S&P 500 is up closer to 8.5% and the Dow Jones Industrial Average is up nearly 3%.
The next big test for the markets awaits Wednesday afternoon.
The Fed will announce its latest policy decision at 2 p.m. ET, with Fed Chair Jay Powell holding a press conference half an hour later.
Markets see an 85% chance the Fed will hike rates by 0.25% on Wednesday, according to data from CME Group.
A 0.25% rate hike would push the Fed’s interest rates down to a range of 5% to 5.25%. The key interest rate has not exceeded the 5% mark since July 2007. With no new economic forecasts due for release, Powell’s comments will be the focus of investors.
“We believe the committee will seek to convey that while a June rate hike is not the current scenario, the next move is up rather than down,” JPMorgan economists wrote in a note to clients last week .
“Chances are increasing that the May rate hike will be the last rate hike of this tightening cycle,” Ryan Sweet, chief US economist at Oxford Economics, wrote in a note to clients on Friday. “When the Fed raises interest rates, it exposes cracks in either the financial markets or the economy. For example, monetary tightening has contributed to recent tensions in the banking system.”
Federal Reserve Chairman Jerome Powell speaks on the phone before attending the plenary meeting of the International Monetary and Financial Committee (IMFC) at the International Monetary Fund building in Washington, DC, the United States April 14, 2023. REUTERS/Ken Cedeno
Elsewhere on the economic data front, the April jobs report is expected to show that 180,000 nonfarm payroll jobs were added to the US economy last month, with the unemployment rate rising slightly to 3.6%, according to data from Bloomberg. In March, the US economy grew by 236k while the unemployment rate fell.
The report will be closely monitored for signs of a slowdown in the labor market that could influence the Fed’s decision on interest rate hikes in June.
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The Fed’s aggressive rate-hike path has tightened credit markets and raised concerns about the health of the region’s banking sector following the collapse of the Silicon Valley bank.
First Republic shares fell nearly 75% last week after the lender announced it had lost $100 billion in deposits during March’s banking turmoil.
Although First Republic has already received $30 billion from a group of the largest banks in the US, First Republic is once again seeking a bailout, with a solution expected before markets open in the US on Monday.
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On the earnings side, Apple’s quarterly earnings release on Thursday will provide another insight into how big tech is holding up amid fears of an economic slowdown.
Investors will be focused on whether Apple sees a slowdown in spending, similar to what Amazon announced last week. And with Apple set to launch new VR headsets later this year, investors will naturally be wondering – what’s the AI strategy?
The earnings season has, by and large, provided investors with a positive surprise relative to Wall Street’s expectations.
According to FactSet, S&P 500 companies are beating analyst estimates at the highest rate since the fourth quarter of 2021. With just over half of S&P 500 companies already reporting earnings, 79% of companies have reported earnings above estimates. This is above the five- and ten-year average.
But as Liz Young, SoFi’s head of investment, pointed out to Yahoo Finance Live, those gains are at odds with “unimpressive” expectations, which have been revised downwards this year.
“Margins are shrinking,” Young said. “And a lot of the story comes with that [earnings season] was that the margins were so thick that they were able to absorb some of this cost pressure. But now we’re seeing those margins shrink and those margins narrow over time. So there won’t be as much room left for companies.”
Last week, big tech earnings from Microsoft (MSFT), Alphabet (GOOGL) and Meta Platforms (META) catalyzed a market rally as results showed resilience despite a looming slowdown. That sentiment ultimately outweighed the gloomier prospects Amazon presented relative to its tech titans.
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Still, analysts argue that this better-than-feared picture poses a significant challenge for those who remain bearish in the sector that has been hit hardest by aggressive rate hikes in 2022.
“Tech investors went into this week with some white knuckles and heartburn expecting solid big tech earnings from Microsoft, Alphabet, Meta, Intel and Amazon and are now heading into the weekend instead for a relaxing cappucino with much better than feared tech earnings. drinking revenue,” Wedbush’s Dan Ives wrote in a note released Saturday.
“The narrative for the tech sector is becoming clearer, though many tech haters are screaming fire in a crowded theater along the way [first quarter] merits.”
economic calendar
Monday: S&P Global US Manufacturing PMI, April (50.4 exp. previously 49.2); ISM Manufacturing, April (46.7 expected, 46.3 previously); Construction Spending MoM, Mach (+0.1% exp., previously -0.1%);
Tuesday: JOLTS Jobs, March (9.73 million expected, 9.9 million last month); Factory Orders, March (+1.3% expected, -0.7% last month); US Auto Sales, April (annual rate of 14.82 million vehicles expected)
Wednesday: MBA Mortgage Applications, Week Ended April 28; ADP Private Payrolls, April (+150k expected, +145k before); S&P Global US Services PMI, April (53.7 exp. previously 52.6); ISM Services PMI, April (51.8 expected, 51.2 last month); Fed monetary policy decision (0.25% rate hike expected)
Thursday: Challenger job cuts year-on-year, April; Unit labor costs, first quarter (+5.4% expected, previously +3.2%); Non-farm productivity, first quarter (-1.8% expected, previously +1.7%); Weekly initial jobless claims (240,000 expected, 230,000 so far)
Friday: Nonfarm payrolls, April (+180k expected, previously +236k); Unemployment rate, April (3.6% expected, previously 3.5%); Average hourly earnings, month-to-month, April (+0.3% expected, previously +0.3%); YoY Average Hourly Earnings, April (+4.2% expected, +4.2% previously); Average weekly hours worked, April (34.4 expected, 34.4 before); Activity rate, April (62.6% expected, 62.6% before)
results calendar
Monday: Avis Budget Group (CAR), Chegg (CHGG), Diamondback Energy (FANG), Microstrategy (MSTR), Norwegian Cruise Line (NCLH), SoFi Technologies (SOFI),
Tuesday: Advanced Micro Devices (AMD), BP Oil (BP), Caesars Entertainment (CZR), Ford (F), Match Group (MTCH), Marriott International (MAR), Marathon Petroleum Corporation (MPC), Paycom (PAYC), Pfizer ( PFE), Starbucks (SBUX), Uber Technologies (UBER)
Wednesday: Albemarle Corporation (ALB), CVS Health (CVS), Estee Lauder (EL), Etsy (ETSY), Generac (GNRC) Phillips 66 (PSX), Qualcomm (QCOM), Wingstop (WING), World Wrestling Entertainment (WWE), Yummy! Brands (YUM)
Thursday: Apple (AAPL), Anheuser-Busch InBev (BUD), Booking Holdings (BKNG), Block (SQ), Carvana (CVNA), Coinbase (COIN), ConocoPhillips (COP), DraftKings (DKNG), Moderna (MRNA), Novo Nordisk (NVO), Peloton (PTON), Royal Caribbean Group (RCL), Shell (SHEL), Shopify (SHOP)
Friday: AMC Entertainment (AMC), fuboTV (FUBO), Warner Bros. Discovery (WBD)
Josh is a reporter for Yahoo Finance.
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