The Stock Market Continues to Reach New Record Highs
The stock market achieved another milestone as it reached new record highs, signaling continued growth and momentum in the market. Last week, both the S&P 500 and Nasdaq reached their highest levels ever, contributing to the stock market’s exceptional performance. Interestingly, the S&P 500 has seen a rise in 16 out of the last 18 weeks, a feat not seen since 1971, according to research conducted by Deutsche Bank.
Fed to Test the Stock Market’s Rally
This week, investor attention will be on Federal Reserve Chair Jerome Powell’s testimony on Capitol Hill and the release of the February jobs report. Powell’s updates on the state of the US economy, the fight against inflation, and potential interest rate cuts will be closely monitored. Additionally, updates on economic activity in the services sector and job openings will further impact market sentiment and performance.
Fed Fodder
The Federal Reserve Chair’s semi-annual monetary policy testimony to the House and Senate will provide crucial insights into the central bank’s future decisions. Market participants await Powell’s remarks regarding the general economic state, inflation concerns, and discussions of potential interest rate cuts. Observers suggest that the Federal Open Market Committee’s policy decision, combined with economic projections, will be particularly influential in shaping market movements.
The State of the Labor Market
The recent increase in the Fed’s preferred inflation gauge has led to expectations of patience from the central bank in terms of interest rate cuts. Market analysts suggest that the resilience of the labor market will be vital in maintaining economic stability and averting a recession. This week’s data, including updates on wages and job openings, along with the latest jobs report, will shed further light on the labor market’s condition.
Earnings Update
Earnings season is wrapping up, with the majority of S&P 500 companies having already reported their corporate results for the fourth quarter. Data from FactSet indicates a 4% earnings growth for the S&P 500 in Q4 compared to the same period the previous year. This marks the second consecutive quarter of earnings growth for the benchmark index. Furthermore, estimates for earnings growth in the current quarter are not experiencing the typical decline, potentially indicating a more stable earnings outlook.
History Suggests Stocks Have More Room to Run
Wall Street has defied expectations, as the S&P 500 and Nasdaq Composite posted their best February performances since 2015 and remained resilient amidst uncertainties surrounding the Federal Reserve’s interest rate-cut trajectory and potential election concerns. Surprisingly strong earnings reports from major tech companies have prompted several Wall Street strategists to increase their year-end targets for the S&P 500. Historical data indicates that the year tends to have a positive outlook when the S&P 500 sees positive performances in January and February. This year, the benchmark index has the potential to deliver further positive returns based on past performance and current market trends.
Weekly Calendar
- Monday: No notable economic releases; Earnings: Gitlab (GTLB), Stitch Fix (SFIX), ThredUp (TDUP)
- Tuesday: Economic data: S&P Global US Services PMI, February, final; Earnings: Box (BOX), ChargePoint Holdings (CHPT), Crowdstrike (CRWD), Nio (NIO), Nordstrom (JWN), Ross Stores (ROST), Target (TGT), Vivid Seats (SEAT)
- Wednesday: Economic data: Federal Reserve Chair Jerome Powell begins semi-annual testimony on Capitol Hill; MBA Mortgage Applications, ADP private payrolls
- Thursday: Economic data: Challenger job cuts, unit labor costs, nonfarm productivity, initial jobless claims; Earnings: American Eagle Outfitters (AEO), Big Lots (BIG), BJ’s (BJ), Broadcom (AVGO), Costco (COST), DocuSign (DOCU), Gap (GPS), Kroger (KR), Marvell Technology (MRVL), MongoDB (MDB)
- Friday: Economic calendar: Nonfarm payrolls, unemployment rate, average hourly earnings; Earnings: No notable releases
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