Wall Street managed slight gains ahead of the open Monday following its first positive week in nearly a month. Tesla and Apple shares both turned higher on separate news, while the Japanese yen rebounded from 34-year lows.
Week ahead is packed with data, earnings as Apple and Amazon report, Nonfarm Payrolls loom
Apple, Tesla shares rebound early Monday following positive news for Tesla out of China, Apple upgrade
Fed set to meet and analysts expect no rate policy change, with higher-for-longer firmly baked in
(Monday market open) This week has something for everyone, including earnings from Apple (AAPL) and Amazon (AMZN), a Federal Reserve meeting, job openings data, and an update on U.S. debt levels. It’s all capped off Friday by the April Nonfarm Payrolls report.
Major U.S. indexes broke an “0 for April” streak last week, while fresh direction could be set by Treasury yields’ response to data and mega caps’ reaction to earnings. Major indexes edged higher early Monday, possibly supported by a slight drop in yields overnight and firmness in two of the year’s most beaten-down mega caps: Apple and Tesla (TSLA).
Tesla popped more than 10% early Monday, lifted by The Wall Street Journal reporting that China has given tentative approval to the company’s rollout of Full Self-Driving (FSD) software. Apple climbed 2% ahead of the open after getting an upgrade from Wall Street research firm Bernstein.
Following a relatively quiet data and earnings calendar Monday, action picks up Tuesday afternoon when Amazon reports. That’s followed Wednesday by the conclusion of the Federal Open Market Committee (FOMC) meeting and Thursday by Apple’s earnings. The Fed isn’t expected change rates but could provide an update on its quantitative tightening (QT) policy, a method of reducing liquidity it adopted to slow the economy.
Consensus early this week for April Nonfarm Payrolls growth climbed since last week. It’s now 250,000, according to Briefing.com. Earlier expectations hovered near 210,000. The March number was 303,000, and generally anything above 200,000 signals strength. The unemployment rate is expected to stay at 3.8%.
Futures based on the S&P 500® index (SPX) were up 0.2% shortly before the close of overnight trading and futures based on the Nasdaq-100® (NDX) jumped 0.3%. Futures based on the Dow Jones Industrial Average® ($DJI) rose less than 0.1%.
Refunding, please: One potential yield catalyst this week is the Treasury Department’s refunding announcement for the coming two quarters. This could give investors a sense of how much debt the Treasury plans to auction over the next few months. The Treasury is expected to keep its sales of long-term debt steady, Bloomberg reported.
Near-term financing needs are improving due to stronger tax receipts and a deficit that appears to be smaller than previously expected, Reuters reported. If today’s announcement is well received, it could take some pressure off the Treasury market, possibly easing yields.
Earnings scorecard: Through late last week, 46% of S&P 500 companies had reported Q1 results. The blended earnings per share growth rate for Q1 is 3.5%, FactSet said. That includes companies already reporting and expectations for those yet to report.
“Earnings have been generally better than expected so far this reporting season, with a 78% beat rate in line with the recent average,” said Liz Ann Sonders, chief investment strategist at Schwab. “However, stocks of companies having missed estimates have been punished to a greater degree than those of companies having beaten estimates have been rewarded. In addition, negative pre-announcements have outnumbered positive pre-announcements by 3-to-1.”
About 180 S&P 500 companies reported last week, and this week is almost as packed. Highlights in coming days include Amazon, Apple, Starbucks (SBUX), Advanced Micro Devices (AMD), McDonald’s (MCD), and Coca-Cola (KO), Coinbase (COIN), among many others.
Checking Wall Street’s reaction to earnings so far, the theme might be, “Don’t tell me what you did. Say what you’re going to do.” Companies delivering weaker-than-expected guidance, like Meta Platforms (META) and Intel (INTC), felt investors’ collective wrath. Microsoft (MSFT) appears to be the exception.
Cost basis: One earnings-related item to watch this week is how investors key in on expenditures, given the scrutiny attached to Meta Platform’s announcement last week of spending exceeding expectations by billions.
Speaking of costs, it’s not a firm rule, but so far this earnings season, investors seem to be awarding companies more that improve their bottom lines through organic growth, and less so those that grow profit simply by cost-cutting.
Apple and Tesla: Shares of both drove higher early Monday with Tesla helped by positive self-driving news out of China and Apple lifted by an upgrade from Bernstein. For self-driving, Tesla is reportedly teaming up with Baidu (BIDU), Reuters reported. Baidu will provide the mapping and navigation for Full Self-Driving assistance. This follows a surprise trip to China by Tesla CEO Elon Musk. The news represents a “major moment” for Tesla, said Wedbush analyst Dan Ives, quoted by Barron’s early Monday. Ives said the long-term valuation story at Tesla “hinges on FSD and autonomous,” and a key piece of that is making FSD available in China where EV competition is fierce.
Apple’s mild rise came after Bernstein said it believes replacement cycle tailwinds and incremental generative AI set the company up well for a strong iPhone 16 cycle.
Stocks on the move:
Week ahead: Today is quiet from a data perspective, but things perk up Tuesday with April consumer confidence, and, of course, the FOMC meeting Wednesday. The latter part of the week is dominated by Friday’s April Nonfarm Payrolls report and to a lesser extent the latest Institute for Supply Management (ISM) data on the manufacturing and services sectors.
Consensus for April consumer confidence due soon after tomorrow’s open is 104, according to Briefing.com. That’s down from 104.7 the prior month. Keep an eye on average 12-month inflation expectations, which inched up to 5.3% in March from 5.2% the prior month.
The April ISM Manufacturing report Wednesday is seen at 50 on the dot, Briefing.com said, right at the level needed to signal market expansion but down from 50.3 the previous month.
Wednesday morning also brings the closely watched March Job Openings and Labor Turnover Survey (JOLTS) report. Analysts expect job openings of 8.72 million, Trading Economics said, down from just over 8.75 million the prior month.
Factory gate: If you’re looking for data excitement early this week, check across the Pacific late Monday for expected April manufacturing data from China. Both the government and Caixin Manufacturing indexes came in above 50 in March, a sign of expansion. The strength likely extended into April, according to Trading Economics. Improved manufacturing dynamics out of China can be a mixed bag for the U.S. economy. On one hand, it can signal strong consumer demand both here and in China. But it can sometimes lead to spikes in commodities like crude oil and copper. Their recent rallies partly reflect supply chain issues related to geopolitics, but don’t discount the possibility that an awakening China plays a role.
Yin and Yen: Also on the Pacific Rim, the Japanese yen rebounded early today after falling to a new 34-year low of around 160 to the dollar. The earlier plunge followed a decision late last week by the Bank of Japan (BoJ) to leave rates unchanged while forecasting slightly higher inflation. Media reports now say there’s talk that Japan could intervene to prop up the yen, which helped lead to the yen’s rebound today and pushed the dollar lower. A weaker dollar would likely be a tailwind for stocks if it lasts.
Friday in review:
Alphabet’s (GOOGL) rally helped the Nasdaq Composite® ($COMP) end a four-week losing streak. The SPX broke a three-week downdraft. The S&P 500 Communication Services index ($SP500#50) surged 4.7% and ended the week with a 2.7% gain. Semiconductor shares were also strong, led by a 6% gain in Nvidia (NVDA). The Russell 2000® Index (RUT) added 1.1% Friday and posted a 2.8% advance for the week.
Early today, futures traders place 97% chances of rates remaining unchanged at the FOMC’s April 30–May 1 meeting. Odds of a 25-basis point cut at the June meeting are around 11%, rising to roughly 30% for the late-July meeting, based on the CME FedWatch Tool. Markets build in one to two cuts by year-end.
Trading tools: For the latest insights into key data, technical factors, helpful charts, and clues into potential market direction, remember to check Schwab’s Weekly Trader’s Outlook, which comes out late every Friday.
CHART OF THE DAY: RSI AND SMA. The S&P 500 Index (SPX-candlesticks) may be near an inflection point after coming within range of its 50-day simple moving average (SMA) of 5,124 (light blue line). This follows a quick rise from an oversold 30 Relative Strength Index (RSI) level earlier last week to a mid-range 50 RSI by Friday. The darker blue line is the 20-day moving average of 5,116, Closing above 50-day SMA might signal a fresh bullish move, but failure to do so could signal the quick upside jump has run its course. Data source: S&P Dow Jones Indices. Chart source: thinkorswim platform. For illustrative purposes only. Past performance does not guarantee future results.
Ideas to mull as you trade or invest
Talking technicals: At its lows last week, the SPX was right around 30 on the 0–100 Relative Strength Index (RSI), which measures market momentum to determine oversold or overbought conditions. A number that low suggests near-term technically oversold conditions. The SPX then bounced to the 50 RSI level by the end of the week, which suggests to technicians that the recent rally may have run its course with the technical picture more balanced. Friday’s rally also took the SPX to just below its 50-day simple moving average (SMA) of 5,120. “If the SPX gets rejected at its 50-day SMA, this could signal a bearish confirmation of a change in trend,” said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. “However, if the SPX can close back above its 50-day SMA, the technicals flip in favor of the bulls. So, at least on a near-term basis, we may be approaching an inflection point on the charts.” The path of Treasury yields this week could help set direction, Peterson added.
Danger signs? If inflation stays sticky, only a weaker trend in jobs would likely get the Fed’s attention. Despite recent strong economic data, some signs do point toward jobs possibly heading into a softer period. Earnings from two major trucking firms earlier this month both showed volume falling, perhaps evidence of declining business and consumer demand. If businesses are buying less, it could mean they’re trying to cut costs. That often means trimming positions. Also, the 1.6% rise in Q1 GDP was well below 3.4% in Q4.
“Wrong reasons” for potential rate cuts: Falling employment, if it occurs, might tip the Fed’s hand toward rate cuts, but wouldn’t be positive news for the economy in general or the stock market. “With Fed officials signaling that the bar for rate cuts continues to be high—thus pushing out the start date—it’s less likely that we’ll see cuts purely due to progress on the inflation front,” said Kevin Gordon, director, senior investment strategist at Schwab. “Base effects are not going to be as favorable for year-over-year core PCE later this year, which means that any rate cuts will likely be due to labor market weakness. If that’s the case, we shouldn’t expect that many cuts, unless a recession arrives.”
April 30: April Consumer Confidence, Q1 Employment Cost Index, and expected earnings from 3M (MMM), Coca-Cola (KO), Eli Lilly (LLY), McDonald’s (MCD), Advanced Micro Devices (AMD), Amazon (AMZN), Starbucks (SBUX), and Super Micro Computer (SMCI).
May 1: FOMC meeting announcement and press conference, March construction spending, April ISM Manufacturing Index, and expected earnings from CVS Health (CVS), DuPont (DD), Estee Lauder (EL), Mastercard (MA), and Carvana (CVNA).
May 2: March Trade Balance, March Factory Orders, and expected earnings from Baxter (BAX), ConocoPhillips (COP), Apple (AAPL), Amgen (AMGN), and Coinbase (COIN).
May 3: April Nonfarm Payrolls, April ISM Non-Manufacturing PMI, and expected earnings from Hershey Foods (HSY).
May 6: Expected earnings from Palantir (PLTR) and CNA Financial (CNA).
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