How the Fed will proceed with its interest rate policy will be of primary interest to investors next week when the latest inflation data is released. The price data comes at a difficult time as markets try to hedge against rising U.S. Treasury yields. Stocks rose on Friday after part of the March jobs report reassured investors that the central bank is on track to cut interest rates this year. The U.S. economy added more jobs in March than expected, highlighting the strength of the labor market. However, average hourly wages are in line with expectations, suggesting that the labor market and the economy as a whole are not actually overheating. The market is currently pricing in three rate cuts this year, starting in June, according to the CME FedWatch tool. But Wall Street will get more insight next week into what Fed officials are watching when the March consumer and producer price indexes are released. Investors have largely ignored recent reports suggesting inflation is stronger than expected, arguing, for example, that much of January’s rise was due to seasonal factors. For investors, March’s numbers could confirm whether inflation is actually on track toward the Fed’s 2% target or whether base-case assumptions for interest rates need to be reconsidered. be. Stronger inflation next week could put a damper on this year’s unusual rally in stocks, especially as concerns grow that the market is overbought. IEF YTD Mountain Price for iShares 7-10 Year Treasury Bond ETF this year. “A lot of the momentum and breadth in the fourth quarter and the first quarter are pretty bullish signs, but they’re pretty limited in the short term,” said Ross Mayfield, investment strategy analyst at Baird. said. “Sentiment is bullish and positioning is quite aggressive. Markets continue to value rate cuts. So I think rising yields could be problematic for equity markets unless there is an upside catalyst. “in a few days. “We certainly expect a little bit more volatility than we saw in the first quarter, and there could be some correction here,” Mayfield added. On Friday, stock benchmarks had a down week as oil prices soared and U.S. Treasury yields rose. The Dow Jones Industrial Average ended the week 2.3% lower, while the S&P 500 and Nasdaq Composite were down about 1% and 0.8%, respectively. West Texas Intermediate crude oil futures hit a five-month high this week, topping $87 a barrel. The yield on the 10-year U.S. Treasury reached 4.4% on Friday, up from 4.2% a week earlier. Meanwhile, investor sentiment surveys appeared to be at a standstill. .SPX Mountain 2023-10-31 S&P500 since late October. Short-term pressures Data forecasts for next week show Wall Street expects continued progress in the fight against inflation. Economists polled by FactSet expect the consumer price index to rise 0.3% on a monthly basis in March, lower than February’s 0.4% rise. Similarly, the producer price index is expected to rise 0.5% in March, according to FactSet consensus estimates. This is lower than last month’s 0.6% rise. But some investors remain concerned that inflation could accelerate in the months leading up to the June Fed meeting, potentially changing market expectations for interest rates. Hedge fund manager David Einhorn told CNBC’s Scott Wapner this week that he expects inflation to pick up again and has made safe-haven gold a big part of his portfolio. On Friday, Fed Governor Michelle Bowman said that if inflation remains high, the Fed may need to raise rates instead of cutting them. Some worry that recent signals point to a near-term correction in the stock market. Bespoke Investment Group found that sentiment is at historically high levels and the bull-bear spread, as measured by Investors Intelligence and the American Association of Individual Investors, is in the 96th percentile of data dating back to 1997. Historically, a high number means lackluster future returns. , bespoke found. On average, stocks typically decline slightly after a bullish outlook, he said. His next three months will see an average increase of 1 percentage point. Over the next year, they made an average improvement of almost 3 percentage points. Positive Upside Either way, many investors remain optimistic that stocks can continue to rise, citing recent gains and the resilience of the economy as constructive signals for the market. US Bank’s Tom Heinlin has a year-end target for the S&P 500 of 5,520, favoring US stocks over non-US stocks and large-cap stocks over small-cap stocks. He expects sectors such as materials and energy to benefit as more stocks participate in the rally. “I’d say we’re still optimistic about a further collapse in stock prices,” Heinlin said. “And that’s based on the sustainability of this year’s earnings forecast.” Laffer Tengler securities analyst Jamie Myers is also positive on the stock. He sees opportunities in dividend growth stocks, saying investors should choose companies that have recently raised their dividends, such as Walmart. This move shows that management is confident in future earnings. First quarter earnings season also begins next week. Next Friday, the nation’s biggest banks, from Citigroup to JPMorgan Chase to Wells Fargo, will release their earnings results. The minutes of the most recent Federal Open Market Committee meeting are also expected to be submitted next Wednesday. Week Ahead Calendar All Time (ET). Monday, April 8th Tuesday, April 9th ​​6:00 a.m. NFIB Small Business Index (March) Wednesday, April 10th 8:30 a.m. Consumer Price Index (CPI) (March) 8:30 a.m. Final hourly wage (March) 8:30 a.m. Final value of average weekly working hours (March) ) 10 a.m. Final value of wholesale inventory (February) 2:00 p.m. Treasury budget NSA (March) 2:00 p.m. FOMC minutes revenue: Delta Air Lines Thursday, April 11th 8:30am Continuing Unemployment Insurance Claims (3/30) 8:30am Initial Claims (04/ 06) 8:30am Producer Price Index PPI Revenue: CarMax April 12 Sun-Friday 8:30 a.m. Export Price Index (March) 8:30 a.m. Import Price Index (March) 10 a.m. Preliminary Michigan Sentiment (April) Earnings: State Street, Wells Fargo, JP Morgan・Chase, Progressive, Citigroup
