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Heavy Earnings Week Commences With an Eye on The Fed
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Who ordered the busy week for market participants? Your shipment is in. The heaviest week yet of Q1 earnings joins with Jobs Week — ADP (ADP - Free Report) private-sector payrolls Wednesday and U.S. Bureau of Labor Statistics (BLS) nonfarm payrolls Friday, not to mention a new JOLTS report tomorrow and Weekly Jobless Claims Thursday — and the latest monetary policy meeting from the Federal Open Market Committee (FOMC).
First things first, however: the final shoe has dropped for First Republic Bank , the third Silicon Valley area bank to go under in the past two months. Assets and deposits are being seized by regulators, to be absorbed by JPMorgan (JPM - Free Report) , which won itself a bargain even if we don’t see a ripple in the banking giant’s numbers as of its Q2 earnings report. This comes highly reminiscent of when Silicon Valley Bank (SVB) was seized by First Citizens Bank (FCNCA - Free Report) directly before the last FOMC meeting.
We don’t expect Wednesday’s decision on interest rates to change from the previously indicated +25 basis points (bps), going back to the Fed’s dot-plot this past winter. This would bring the Fed funds rate to 5.00-5.25%, the highest we’ve seen since prior to the financial crisis ahead of the Great Recession 15 years ago. Inflation metrics have been deflating gradually overall, but consensus is strong the Fed feels it can add another quarter-point — at least. Analysts will be parsing closely the language pertaining to possible further increases in June and beyond.
Markets are flat to start a new trading week on these prospects. Last week was positive for three out of the four major indices (only the mall-cap Russell 2000 dropped nearly 1% over the past five trading days), with strong tech earnings giving the Nasdaq a boost to +2 1/4%. With so much to take in this week — including more than 1600 companies reporting earnings this week, featuring Apple (AAPL - Free Report) on Thursday afternoon — it makes sense that traders will keep some powder dry at this early point in the trading week.
Once the market opens, both S&P and ISM Manufacturing PMI numbers come out. Both are expected to tack upward from previous levels; we saw cycle lows in last month’s ISM Manufacturing report, while S&P PMI bottomed out in December of last year. Importantly, S&P PMI is expected to cross over the 50-point threshold between growth and loss, while ISM looks to bounce off lows of 46.3%, but only by 40 bps. That said, these metrics, while demonstrating some relative weakness, are not shabby enough to change the Fed’s mind on rate policy.
Also, its semiconductor week on Q1 earnings, with Lattice Semi (LSCC - Free Report) , NXP Semi (NXPI - Free Report) and ON Semi (ON - Free Report) all putting out results after today’s closing bell. Advance Micro Devices (AMD - Free Report) puts out its numbers tomorrow.
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Heavy Earnings Week Commences With an Eye on The Fed
Who ordered the busy week for market participants? Your shipment is in. The heaviest week yet of Q1 earnings joins with Jobs Week — ADP (ADP - Free Report) private-sector payrolls Wednesday and U.S. Bureau of Labor Statistics (BLS) nonfarm payrolls Friday, not to mention a new JOLTS report tomorrow and Weekly Jobless Claims Thursday — and the latest monetary policy meeting from the Federal Open Market Committee (FOMC).
First things first, however: the final shoe has dropped for First Republic Bank , the third Silicon Valley area bank to go under in the past two months. Assets and deposits are being seized by regulators, to be absorbed by JPMorgan (JPM - Free Report) , which won itself a bargain even if we don’t see a ripple in the banking giant’s numbers as of its Q2 earnings report. This comes highly reminiscent of when Silicon Valley Bank (SVB) was seized by First Citizens Bank (FCNCA - Free Report) directly before the last FOMC meeting.
We don’t expect Wednesday’s decision on interest rates to change from the previously indicated +25 basis points (bps), going back to the Fed’s dot-plot this past winter. This would bring the Fed funds rate to 5.00-5.25%, the highest we’ve seen since prior to the financial crisis ahead of the Great Recession 15 years ago. Inflation metrics have been deflating gradually overall, but consensus is strong the Fed feels it can add another quarter-point — at least. Analysts will be parsing closely the language pertaining to possible further increases in June and beyond.
Markets are flat to start a new trading week on these prospects. Last week was positive for three out of the four major indices (only the mall-cap Russell 2000 dropped nearly 1% over the past five trading days), with strong tech earnings giving the Nasdaq a boost to +2 1/4%. With so much to take in this week — including more than 1600 companies reporting earnings this week, featuring Apple (AAPL - Free Report) on Thursday afternoon — it makes sense that traders will keep some powder dry at this early point in the trading week.
Once the market opens, both S&P and ISM Manufacturing PMI numbers come out. Both are expected to tack upward from previous levels; we saw cycle lows in last month’s ISM Manufacturing report, while S&P PMI bottomed out in December of last year. Importantly, S&P PMI is expected to cross over the 50-point threshold between growth and loss, while ISM looks to bounce off lows of 46.3%, but only by 40 bps. That said, these metrics, while demonstrating some relative weakness, are not shabby enough to change the Fed’s mind on rate policy.
Also, its semiconductor week on Q1 earnings, with Lattice Semi (LSCC - Free Report) , NXP Semi (NXPI - Free Report) and ON Semi (ON - Free Report) all putting out results after today’s closing bell. Advance Micro Devices (AMD - Free Report) puts out its numbers tomorrow.