Earnings reports continue to maintain investor focus this week as Apple and other big names report; the U.S. and China begin trade negotiations; and steel and aluminum tariffs are due to be imposed May 1, Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook.
A parade of big names will report earnings this week, but the one the market will be paying very close attention to is Apple, Krosby said.
“We’ve seen downgrades from some prominent analysts after a number of suppliers to Apple downgraded their own expectations in terms of orders,” she said. “That suggested that Apple’s sales are not as robust as much as the market has previously thought. Accordingly, market participants are particularly interested in Apple’s guidance.”
The Federal Open Market Committee (FOMC) of the Federal Reserve meets this week, and while there is little expectation that there will be a rate increase announced, market participants are interested in the assessment of the economy and projections of further rate moves this year.
“The market expects a rate hike at the next Fed meeting in June,” Krosby said.
Trade negotiations begin in China later this week, and the May 1 deadline on steel and aluminum tariffs is to be imposed, except if exemptions are to be extended.
“The negotiations are an attempt to diffuse any worries about a trade war with the world’s second largest economy,” Krosby said.
With a litany of economic data releases this week, Friday’s payroll report will be the most important for the market, particularly the wage component.
“The consensus estimate is that 185,000 new jobs will be created. The last report disappointed the market,” Krosby said. “The question will be where will wages go, because companies will want to raise prices to maintain their margins, which provides another pathway to inflation.”
Wages are expected to move higher, but not to the degree that caused the previous sell-off in the market, Krosby said.
“There is portfolio ‘window dressing’ at the end of the month as portfolio managers attempt to increase their performance vis-à-vis competitors,” she said. “This can lead to increased volume in trading and some market choppiness.”
Earnings to watch:
Apple, Tesla, McDonald’s, Allergan, Merck, Pfizer, Clorox, DowDupont, Snap, Under Armour, Mastercard, MetLife, Yum! Brands, Kraft Heinz, CBS, BP, Spotify, Berkshire Hathaway
This week’s important data releases:
Monday: Personal Income and Outlays; Consumer spending; Pending home sales
Tuesday: Deadline for tariffs on steel and aluminum to be imposed, unless extended; Markit manufacturing PMI; ISM manufacturing; Construction spending; Vehicle sales
Wednesday: ADP private-sector employment report; FOMC policy statement
Thursday: Markit services PMI; ISM services report; Factory orders
Friday: Non-farm payroll report
Read Quincy Krosby’s full Q2 Market Commentary: Regime Change.
The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.