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Week Ahead: Growth Stocks, Employment Data, and Fed Powell Testifies at Congress
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February was a challenging month for the stock market. With renewed fears of inflation, and further rate hikes this year, market indexes sold off nearly -5% in the month. But last week the market may have found support as it finished the week strongly. The S&P 500 clearly bounced back at the 200-day moving average, giving bulls a clear edge in the short term.
The market isn’t clear yet. This week is marked by a timely testimony from Jerome Powell in front of congress and critical employment data in the second half of the week. Additionally, we will see earnings from a couple of former growth stock darlings, and a highly rated compounder stock.
Image Source: Zacks Investment Research
Monday
Monday is going to be on the light side for new data. Factory orders will be released at 10 am EST, which will be it for economic data. No major earnings releases either.
After the weekend there are still plenty of jitters to digest. Bitcoin has consolidated at the bottom of a range this weekend after getting hammered on Friday. After doubts about the viability of Silvergate Bank became public, crypto markets tanked.
Image Source: TradingView
Tuesday
On Tuesday things get started in earnest. In the morning, Fed Chair Powell will be testifying in front of the Senate. Market participants will be listening closely to Powell’s rhetoric as even slight new deviations in his speech can move the market significantly.
The primary concerns now have to do with whether the central bank will be raising 25 bps or 50 bps, and how much higher rates will have to go. Last month, economic data showed a welcome slowdown in the rate of inflation, but is it enough? With tight labor markets keeping wages firmly higher, it will be difficult to reduce inflation significantly.
The most hawkish observers believe that there needs to be a legitimate slowdown in economic growth to achieve the Fed’s 2% inflation goals.
Also on Tuesday, will be an earnings report from Sea Limited(SE - Free Report) . SE was one of the hottest stocks during the post-Covid boom, but has since corrected significantly. After a near 10x run-up the stock has sold off and stayed down for some time.
Even after the huge sell-off, Sea Limited is still trading at 52x one-year forward earnings. But things may be improving for the stock. SE currently holds a Zacks Rank #2 (Buy), indicating an upward earnings revision trend.
Image Source: Zacks Investment Research
Wednesday
Wednesday morning Jerome Powell will be testifying in front of the House of Representatives with the same concerns. As always, what Powell says is absolutely critical to future expectations of interest rates and the economy.
The market will also be getting the first of several data points on employment. Last month, ADP employment showed 106,000 new private sector jobs, which was on the weak side. This month the number is expected to be 210,000. A number in line, or below expectations should be welcomed by the market as a signal that labor markets are loosening. But a hot print may stoke inflation fears.
MongoDB(MDB - Free Report) will be reporting on Wednesday morning as well. MDB was another stock that had a huge run-up during the boom, only to come crashing down in 2022. Things may be turning around though, as MDB is already up more than 10% YTD with improving earnings expectations. MDB currently boasts a Zacks Rank #2 (Buy).
Sales are projected to grow 26% YoY to $335 million, and earnings expectations have flipped positive, a welcome new trend for many high growth tech companies.
Image Source: Zacks Investment Research
Thursday
More employment data comes out on Thursday morning, this one in the form of Jobless Claims. Like ADP, investors want to see steady slowing of the labor market. Too tight and fears of more rate hikes for longer will spook the market. Alternatively, a rapid slowdown in employment can induce recession panics. Either way, this data is going to be closely scrutinized.
Ulta Beauty (ULTA - Free Report) , the retail cosmetics giant will be reporting after the market closes on Thursday. ULTA stock performance is something to marvel at. Over the last 15 years the stock is up 3600%. And it is off to a strong start this year, already up 12% YTD.
Furthermore, ULTA currently has a Zacks Rank #2 (Buy), indicating a strong earnings revision trend. Earnings projections have been upgraded across timeframes, and last quarter EPS surprised to the upside by 30%. Zacks Earnings Surprise Prediction is expecting 8% earnings beat.
Image Source: Zacks Investment Research
Friday
To round up the week, the market will be getting the final employment report. The last employment report blew expectations out of the water, showing 517,000 new jobs, which was way too hot for investors. This report forecasts a more reasonable 225,000 new jobs, and an unemployment rate of 3.4%.
Another report above expectations will really shake up the market as investors absolutely do not want to see employment this tight. The real risk of a too tight labor market is high wage inflation. If wages remain too high it can cause a wage-price spiral, which would indicate that the inflation situation has become dire.
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Week Ahead: Growth Stocks, Employment Data, and Fed Powell Testifies at Congress
February was a challenging month for the stock market. With renewed fears of inflation, and further rate hikes this year, market indexes sold off nearly -5% in the month. But last week the market may have found support as it finished the week strongly. The S&P 500 clearly bounced back at the 200-day moving average, giving bulls a clear edge in the short term.
The market isn’t clear yet. This week is marked by a timely testimony from Jerome Powell in front of congress and critical employment data in the second half of the week. Additionally, we will see earnings from a couple of former growth stock darlings, and a highly rated compounder stock.
Image Source: Zacks Investment Research
Monday
Monday is going to be on the light side for new data. Factory orders will be released at 10 am EST, which will be it for economic data. No major earnings releases either.
After the weekend there are still plenty of jitters to digest. Bitcoin has consolidated at the bottom of a range this weekend after getting hammered on Friday. After doubts about the viability of Silvergate Bank became public, crypto markets tanked.
Image Source: TradingView
Tuesday
On Tuesday things get started in earnest. In the morning, Fed Chair Powell will be testifying in front of the Senate. Market participants will be listening closely to Powell’s rhetoric as even slight new deviations in his speech can move the market significantly.
The primary concerns now have to do with whether the central bank will be raising 25 bps or 50 bps, and how much higher rates will have to go. Last month, economic data showed a welcome slowdown in the rate of inflation, but is it enough? With tight labor markets keeping wages firmly higher, it will be difficult to reduce inflation significantly.
The most hawkish observers believe that there needs to be a legitimate slowdown in economic growth to achieve the Fed’s 2% inflation goals.
Also on Tuesday, will be an earnings report from Sea Limited (SE - Free Report) . SE was one of the hottest stocks during the post-Covid boom, but has since corrected significantly. After a near 10x run-up the stock has sold off and stayed down for some time.
Even after the huge sell-off, Sea Limited is still trading at 52x one-year forward earnings. But things may be improving for the stock. SE currently holds a Zacks Rank #2 (Buy), indicating an upward earnings revision trend.
Image Source: Zacks Investment Research
Wednesday
Wednesday morning Jerome Powell will be testifying in front of the House of Representatives with the same concerns. As always, what Powell says is absolutely critical to future expectations of interest rates and the economy.
The market will also be getting the first of several data points on employment. Last month, ADP employment showed 106,000 new private sector jobs, which was on the weak side. This month the number is expected to be 210,000. A number in line, or below expectations should be welcomed by the market as a signal that labor markets are loosening. But a hot print may stoke inflation fears.
MongoDB (MDB - Free Report) will be reporting on Wednesday morning as well. MDB was another stock that had a huge run-up during the boom, only to come crashing down in 2022. Things may be turning around though, as MDB is already up more than 10% YTD with improving earnings expectations. MDB currently boasts a Zacks Rank #2 (Buy).
Sales are projected to grow 26% YoY to $335 million, and earnings expectations have flipped positive, a welcome new trend for many high growth tech companies.
Image Source: Zacks Investment Research
Thursday
More employment data comes out on Thursday morning, this one in the form of Jobless Claims. Like ADP, investors want to see steady slowing of the labor market. Too tight and fears of more rate hikes for longer will spook the market. Alternatively, a rapid slowdown in employment can induce recession panics. Either way, this data is going to be closely scrutinized.
Ulta Beauty (ULTA - Free Report) , the retail cosmetics giant will be reporting after the market closes on Thursday. ULTA stock performance is something to marvel at. Over the last 15 years the stock is up 3600%. And it is off to a strong start this year, already up 12% YTD.
Furthermore, ULTA currently has a Zacks Rank #2 (Buy), indicating a strong earnings revision trend. Earnings projections have been upgraded across timeframes, and last quarter EPS surprised to the upside by 30%. Zacks Earnings Surprise Prediction is expecting 8% earnings beat.
Image Source: Zacks Investment Research
Friday
To round up the week, the market will be getting the final employment report. The last employment report blew expectations out of the water, showing 517,000 new jobs, which was way too hot for investors. This report forecasts a more reasonable 225,000 new jobs, and an unemployment rate of 3.4%.
Another report above expectations will really shake up the market as investors absolutely do not want to see employment this tight. The real risk of a too tight labor market is high wage inflation. If wages remain too high it can cause a wage-price spiral, which would indicate that the inflation situation has become dire.