The general market ping-ponged last week as news of attacks and possible peace continually peppered the headlines. It was such a busy news week that it almost went unnoticed that the Fed has now walked back almost all of the talk of rate cuts this year.
Several names that squeezed hard over the past weeks like Super Micro Computer (SMCI) and MicroStrategy (MSTR) had rough weeks as the air started to come out of them as the hype around them faded. They both finished the week down over 20%
This week we have earnings in full swing, Inflation data, and PMI data midweek.
Here are 5 things to watch this week in the Market.
Earnings
Tech earnings are in full swing this week with Tesla (TSLA) due out Tuesday, Meta Platforms (META) due Wednesday, and Microsoft (MSFT), Google (GOOGL), and Intel (INTC) due out Thursday. Netflix reported last week with a beat of most metrics but still fell on outlook information. Watching Tesla Tuesday could be insightful if this is a potential earnings pattern for the season. With most of these companies, AI could also be a theme to watch. The term AI has been thrown around a lot in earnings calls since the ChatGPT explosion last year and has been the momentum spike many companies needed. With AI starting to settle though, will it continue to provide positive momentum for the stocks?
Also due out this week is Boeing (BA), and with all of the issues surrounding this company, it will be interesting to see how earnings report. One thing to potentially watch for is any statement surrounding the ongoing congressional investigation or any hint about production/manufacturing. Either of these could materially impact stock price.
Middle East Tensions
Tensions continue to escalate in the Middle East as attacks between Israel and Iran appear to be increasing as well. Outside of oil this also has been causing a significant amount of volatility in the overall market. While it is impossible to time news, one way to protect against increased volatility is to keep your trades small or you can keep the trade hedged. As attacks ramp up, the US markets are hit particularly hard by the news, however, most of these selloffs are bought back in the following hours/days.
Flash PMI
Tuesday we have Flash Manufacturing and Services PMI out at 9:45. As discussed last week, we could be in for a “bad news is good news” regime in the markets. The longer the markets show strength and resilience the longer we could have higher rates. As a result, if we get a miss or a mixed result between the two PMI’s we could see the markets rally on the poor data. If we beat and show a stronger economy we could see the market continue to sell on the rapidly evaporating idea of a rate cut this year.
Pending Home Sales
Housing is still a very large concern in the US market, especially as rates and prices continue to remain high. If home sales expand we could see the market sell on continued strength and resilience even with high prices and financing costs. If we see a miss or contraction in home sales we could see some strength in the market as higher rates could be perceived as working.
Core PCE
Friday Core PCE is due at 8:30 and this could be a very volatile release. PCE is the main marker for inflation that the Fed uses, and if this comes in high we could see some downside pressure in the markets as it digests the news and possible consequences for the long-term interest rates. If we come in at or below estimates though, we could see some strength return to the market on lower rate hopes.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
