As earn­ings sea­son wraps up, in­vestors turn to data

The Pak Banker - - MARKETS/SPORTS -

In­vestors hop­ing that US stocks will build on a strong two-week run will look to a host of data next week, high­lighted by the monthly jobs re­port, for signs the econ­omy is im­prov­ing. With a lack­lus­ter earn­ings sea­son wind­ing down, it will take some solid macroe­co­nomic data to keep the mo­men­tum go­ing on Wall Street.

The bench­mark S&P 500 in­dex .SPX has ral­lied roughly 5 per­cent in the past fort­night, its best two-week run in a year, and is up about 4 per­cent from its Feb. 11 low. Those gains have come as re­cent data has di­min­ished in­vestor con­cerns over a re­ces­sion and with oil prices show­ing signs of sta­bi­liz­ing around $30 a bar­rel.

"If you go back a cou­ple weeks, it was re­ally the pos­i­tive retail sales re­port that kind of got us out of the funk," said Jack Ablin, chief in­vest­ment of­fi­cer at BMO Pri­vate Bank in Chicago. "Now that earn­ings re­ports are be­hind us, the eco­nomic data will take cen­ter stage." Non­farm pay­rolls for Fe­bru­ary cap off the week on Fri­day and are ex­pected to in­crease by 193,000 jobs, and the un­em­ploy­ment rate is fore­cast to hold at 4.9 per­cent. Jan­uary's re­port showed job gains slowed more than ex­pected, al­though ris­ing wages and the low un­em­ploy­ment rate in­di­cated the la­bor mar­ket re­mains firm.

Also due next week are re­ports on ac­tiv­ity in the man­u­fac­tur­ing and ser­vices sec­tors from Markit, a data firm, and the In­sti­tute for Sup­ply Man­age­ment.

While man­u­fac­tur­ing is ex­pected to re­main soft, the data will be eyed for signs the sec­tor is close to bot­tom­ing. Ser­vices ac­tiv­ity data will be also be fo­cus af­ter an early read­ing on

in Wed­nes­day from Markit showed the sec­tor, which had been a bright spot in the econ­omy, con­tracted in Fe­bru­ary for the first time since Oc­to­ber 2013.

"The ser­vices (re­port) is what you want to watch," said Art Ho­gan, chief mar­ket strate­gist at Wun­der­lich Se­cu­ri­ties in New York. Ho­gan said in­vestors were al­ready pre­pared for a weak re­port on the man­u­fac­tur­ing sec­tor, but a read­ing on the ser­vices sec­tor that off­sets the soft pre­lim­i­nary read­ing would be wel­comed.

How­ever, should the data point to an econ­omy that is gain­ing trac­tion, it could also re­duce en­thu­si­asm for stocks, with a mid-March meet­ing of the Fed­eral Open Mar­ket Com­mit­tee on the hori­zon.

"(Pay­rolls) could ac­tu­ally ham­per any fur­ther gains in the mar­ket," said Peter Kenny, equity mar­ket strate­gist at Kenny & Co LLC, in Den­ver.

"Peo­ple will look at that as an in­di­ca­tor that the Fed is more than less likely to move on rates, sooner rather than later."

Volatil­ity could also be height­ened by pol­i­tics, with the cru­cial Su­per Tues­day nom­i­nat­ing con­tests loom­ing next week.

Oil prices will con­tinue to be a ma­jor fac­tor for eq­ui­ties, and a rise of more than 25 per­cent in U.S. crude CLc1 since Feb. 11 has been a key in­gre­di­ent in the ad­vance of U.S. stocks off their 10-month low. Eq­ui­ties have been closely tied to move­ments in crude of late and an­other down­turn in the com­mod­ity is likely to pres­sure stocks. "Un­for­tu­nately, the machi­na­tions and volatil­ity in oil is go­ing to con­tinue to be the tail that wags the dog," said Ho­gan. How­ever, when the eco­nomic data is stronger than the neg­a­tive in­flu­ence of oil, one will see a di­ver­gence be­tween stocks and oil prices, he said.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.