Fed's Powell, jobs report and Apple will rock markets this week
For investors, each week in every month and every quarter has its own rhythms.
Sometimes, it’s almost quiet.
This week will not be one of those quiet weeks. It has two hugely important economic events — and more that would be big deals if it wasn’t for this week’s calendar.
Markets also must digest an absolute flood of earnings, including reports from two of the most valuable companies in the world.
This deluge of information will be played out against inflation uncertainties and geopolitical risks, especially involving Israel and Ukraine.
So too will the growing intensity of the U.S. election season.
There was a hint of what’s coming on April 25 when the Commerce Department’s Gross Domestic Product report, a key snapshot of economic activity, came out.
The U.S. economy was growing but slowly, the report said. Inflation was growing, too, but more strongly.
Combined with unease over Meta Platforms’ (META) spending the plans discussed in its earnings call, the stock market went into a deep funk.
The Dow Jones Industrial Average fell 700 points in about an hour. Interest rates jumped with mortgage-rate quotes topping 7.5%.
By mid-afternoon, bargain hunters were buying stocks happily. The Dow’s 706-point crash? It shrank nearly 50% to only 375 points. The Standard & Poor’s 500 dropped 0.5%, and the Nasdaq Composite slid 0.6%.
After the close, traders were able to cheer — and do more buying — after strong results from Google-parent Alphabet (GOOG) and Microsoft (MSFT) . Futures trading suggested that Friday’s trading would go well, too.
Employees work at the NLMK Pennsylvania plant in Farrell, Pennsylvania. Bloomberg/Getty Images
Friday delivered a good day, and the major averages all ended the week higher, with the Dow up 0.7%, the S&P 2.7% and the Nasdaq up 4.2%.
The S&P 500 and Nasdaq gains were their first after three weeks of declines. Two reasons for the moves higher: Nvidia (NVDA) jumped 15% after several weeks of declines. Alphabet was up 11.6%. Tesla (TSLA) added 14%.
But the lesson of the week: This is not a robustly bullish market. It takes very little to make it move sharply.
Now, it’s the Fed’s turn and a big jobs report
Federal Reserve Chairman Jerome Powell is in a tricky spot.
He’s been saying since November that the Fed is done raising rates and wants to cut them. Only, he and other Fed officials say, the inflation data won’t let them.
The Fed’s inflation target, its line in the sand, is 2%. Actual inflation is sticking at around 3% after hitting as high as 9% in 2022.
The Fed starts a two-day meeting Tuesday and is expected on Wednesday to keep its key federal funds rate at 5.25% to 5.5%, its level since last July and the reason all interest rates are higher.
More on markets and the economy
After the meeting ends, Powell will hold his usual press conference to discuss the ins and outs of the decision and complexities of the current frustrating inflation pressures.
But the chairman may also get a question or more about a Wall Street Journal report that former President Donald Trump’s planners want to reduce the Fed’s independence and perhaps even fire Powell — if Trump wins a new presidential term.
Powell’s current four-year term as chairman ends in 2026.
The Fed decision isn’t even the big enchilada of economic events.
The biggest is the April jobs report, which comes out Friday before U.S. markets open. It’s expected to show unemployment holding at 3.8% and payroll growth of around 240,000.
Those are solid numbers and showing few signs of serious weakening. That was nobody’s expectation when 2023 moved into 2024.
The sleeper report comes Thursday when the Commerce Departments reports on first-quarter economic productivity. It was a robust 3.2% in the fourth quarter, with a consensus estimate of 1.8% for the first quarter.
Amazon, Apple, Lilly dominate earnings reports
A total of 175 S&P 500 companies are reporting earnings reports this week. That’s out of more than 2,500 on the list.
Among the S&P 500 companies are six members of the Dow.
Reporting Tuesday are 3M (MMM) , Amazon.com (AMZN) , Coca-Cola (KO) , and McDonald’s (MCD) .
Reporting Thursday are Amgen (AMGN) and Apple (AAPL) .
Apple’s report and its earnings call will command much scrutiny. The company has not yet articulated how it will use artificial intelligence. And iPhone sales have been under pressure, especially in China.
The shares are down 12.1% this year.
Also among companies reporting this week are:
Monday: Domino’s Pizza (DPZ) , chip maker Onsemi (ON) , NXP Semiconductor (NXPI) , drilling rig operator Transocean (RIG) .
Tuesday: Pharmaceutical giant Eli Lilly (LLY) , Advanced Micro Devices (AMD) , truck builder Paccar (PCAR) and gaming company Caesars Entertainment (CZR) .
Wednesday: Mastercard (MA) , Qualcomm (QCOM) , Pfizer (PFE) , Marriott (MAR) , Metlife (MET) and DoorDash (DASH) .
Thursday: Apple, drug maker Novo Nordisk (NVO) , oil-and- gas producer ConocoPhillips (COP) and tool-manufacturer Stanley Black & Decker (SWK) .
Friday: Berkshire Hathaway (BRK.A) and (BRK.A) , chocolate candy maker Hershey (HSY) and real-estate giant CBRE Group (CBRE) .
Earnings season so far
According to FactSet, 46% of the S&P 500 companies have reported earnings. Of these, 77% have beaten Street earnings estimates, on par with the five-year area. Meanwhile, 60% have beaten revenue estimates.
Eight S&P 500 sectors are leading the earnings growth led by the Communication Services, Utilities, Information Technology, and Consumer Discretionary sectors. The three laggard sectors are Health Care, Energy, and Materials.
Companies reporting negative earnings surprises are getting punished by investors. Meta Platforms fell 10.6% on Thursday after reporting capital expenditures will be higher than expected. The shares were up 0.4% on Friday.