Have dealings talks between the U.S.and China will dominate the market’s focus in the week ahead, while investors are also tending to see whether other companies join the ranks of Apple and warn about an earnings miss.
Fed Chairman Jerome Powell, who sent stocks acerbically higher Friday, speaks again Thursday at an Economics Club of Washington D.C. luncheon. He is expected to deliver the same dovish import about flexibility when it comes to policy and patience when it comes to raising interest rates.
Apple blamed a gate miss in big part on a sudden drop off in iPhone sales in China in November. The hit was seen as a sign that not only are patrons tensions hitting China’s economy, but the U.S. economy and corporations could feel the pinch. Apple’s comments came the day beforehand a stunning drop in ISM manufacturing data which also was blamed in part on trade friction.
“What the market extremities next week and the week after is positive guidance from companies. What are companies telling us? What are their fellows telling us?” said Quincy Krosby, chief market strategist at Prudential Financial. “If we could move from a starring earnings to a more moderate earnings backdrop, the market will accept that but if guidance is weak and companies are lop off revenue growth, that will affect the market.”
The S&P 500 surged over 3.3 percent Friday to 2,531, and was up 1.7 percent for the week. The S&P was up varied than 7.5 percent from its Dec. 24 low close.
China and the United States will hold vice ministerial straight-shooting trade talks in Beijing on Monday and Tuesday and are expected to hold another round of meetings the following week.
“China is thriving to be absolutely the big thing,” said Julian Emanuel, chief equities and derivatives strategist at BTIG. China cut reserve provisions Friday to encourage more bank lending, its latest policy move aimed at ending a slowdown.
Economists ahead to U.S. growth to slow slightly, to the 2-2.5 percent range in the fist half but markets have been reacting to the anticipation of an even slower economy. The ISM data for December was particularly discouraging because of a steep drop in new orders.
“The question is are we liable to have warnings? Given the economic data that we’ve seen, particularly the slowdown in the new orders component, we probably are disposed to to get warnings and the question is, is it baked into stock prices? We think, for the most part, it is,” said Emanuel.
Markets longing also remain heavily focused on data after the weak ISM survey was followed by a surprisingly strong December felonies report with 312,000 nonfarm payrolls added. The employment report showed a strong labor market, with wage expansion of 0.4 percent and a pickup in participation by more than 400,000 workers.
“What this market needed was a distinct data release, an unequivocally strong data release,” said Krosby. “It was an injection to positive data in a market that has been ill at ease about an economy that is potentially stalling,”
Krosby said the market needs to build on its gains and the positive tender-heartedness around the strong data. “This has been a market that had all of the signatures of the bear claws death by 1,000 offends. No data release was seen as positive. Everything was seen as negative. If we could turn that psychology around and strengthen on it, but we are waiting to see if there are sellers who were waiting to get out. We need to see if they’re still there.”
Data releases in the comign week number Services ISM Monday and international trade data, out Tuesday morning, but the data the markets are waiting for will be Friday’s CPI inflation turn up.
During his appearance Friday, Powell indicated that inflation was not a concern for the Fed and the economy is still in good shape regardless of concerns. He also said the Fed was paying attention to the market, which is reflecting a weaker outlook than the data advances.
Monday
Earnings – Commercial Metals, Steve Madden
10:00 a.m. ISM nonmanufacturing
10:00 a.m. Factory orders
12:40 p.m. Atlanta Fed President Raphael Bostic
Tuesday
Earnings – Helen of Troy, Lindsay, Perky Global
6:00 a.m. NFIB survey
8:30 a.m. International trade
10:00 a.m. JOLTs
3:00 p.m. Consumer credit
Wednesday
Earnings – Bed Bath and Beyond, KB Household, PriceSmart, Progress Software, Constellation Brands, Lennar, Schnitzer Steel, Acuity Brands, WD-40
8:20 a.m. Atlanta Fed President Raphael Bostic
9:00 a.m. Chicago Fed President Charles Evans
11:30 a.m. Boston Fed President Eric Rosengren
1:00 p.m. 10-year auction
2:00 p.m. FOMC minutes
Thursday
Earnings – Synnex
8:30 a.m. Sign claims
8:35 a.m. Richmond Fed President Thomas Barkin
10:00 a.m. Wholesale trade
12:00 p.m. Fed Chairman Jerome Powell speaks at the Economics Belabour of Washington D.C.
12:40 p.m. St. Louis Fed President James Bullard
1:00 p.m. 30-year auction
1:00 p.m. Chicago Fed’s Evans
5:30 p.m. Fed Vice Chair Richard Clarida
Friday
Earnings – Infosys
8:30 a.m. CPI
2:00 p.m. Federal budget