Traders on the floor of the New York Stock Exchange, June 18, 2021.
Source: NYSE
Following a report on weak jobs, strategists say the focus of investors may remain on strong profit growth rather than other possible negatives.
Shares mixed last week, ahead of the long Labor Day weekend, with performance higher on the Nasdaq, a slightly higher S&P 500 and a Dow plan. The best performing sectors were on the defensive side, led by real estate investment trusts, utilities, consumer commodities and healthcare.
“You have that Labor Day effect. People are back on vacation” next week, said Art Hogan, chief investment strategist at National Securities.
Hogan said investors expect trading activity to pick up as a result, but it usually remains slow during the meager holiday week. Investors can evaluate their summer performance and move to earnings or add hedges.
“If you look back at the last five weeks after Labor Day that have passed with the market near historic highs, the week after Labor Day is the worst of September,” Hogan said.
The disappointing August job report on Friday, with only 235,000 jobs added, was a shock to sentiment, but stocks were mixed.
“My outlook for the last few weeks is sideways to moderately higher, and it looks like where they’re headed. Not a lot of bearish data is accumulating. At worst, we’re going sideways,” said Randy Frederick, general manager. of Charles Schwab trading and derivatives.
Frederick said that even with concerns about weak jobs and Covid, investors could continue to focus on profits. Economists blamed the spread of the Covid delta variant on the weaker-than-expected job report.
Strategists say other stock-related issues in September could include efforts in Congress to pass infrastructure legislation and possible new taxes.
Ignoring the job report
Frederick said he expects the market to look beyond the August employment report, which was about 500,000 lower than expected. “I don’t think there will be any losses next week for the most part,” he added. “Markets are falling a bit, but I think they’ve taken it easy better than one might expect.”
Weekly unemployment claims data on Thursday could be even more important than usual due to the large lack of the August employment report. Job data is important because this is an area where Federal Reserve Chairman Jerome Powell said he would like to improve more before the central bank can decide to curb bond purchases.
The market has focused on the Fed’s decision to end its $ 120 billion a month bond purchase program because it is seen as a precursor to interest rate hikes, though Powell has stressed that the two are unrelated.
“If you feel like it [the jobs report] he pushes the announcement of a reduction at the November meeting, rather than the September meeting, and for the most part it was a consensus, ”Hogan said.
Hogan said the market will also look at any inflation-related data, so it makes Friday’s production price index important after it rose last month. The consumer price index, released the following week, will be even more important for the market.
John Briggs, head of macro strategy at NatWest Markets, said markets will be waiting for any Fed-related headlines after the disappointing employment report.
“Next week, you have it [New York Fed President John] Williams talking. Your prey will be important. He is considered close to Powell, “Briggs said. Williams spoke at a briefing on the economy Wednesday afternoon.
What will follow for the actions
In addition to the Fed, the next major stock event will be the third-quarter profit season, which begins in early October. Earlier, investors will be awaiting any comments from the company on the results.
Frederick said the revenue force has been driving stocks and could continue to do so. “The market was so overvalued for a while until the gains recovered, but the gains were spectacular and now the valuations are not as high as a few months ago, so we can do that, ”he said.
According to Refinitiv, profits are expected to increase 29.8% during the third quarter, following the 95.6% increase in the second quarter.
“There is a news gap related to earnings,” Frederick said, noting that the market could be influenced by geopolitical events in the meantime.
But even if the market loses strength, it does not expect a big sell-off, as, for the time being, buyers continue to enter as long as the market has a setback.
The S&P 500 finished the week up 0.6%, with 4,535, up from a 1.5% rise on the Nasdaq to 15,363, a new high. The Dow was flat, down 0.2% at 35,369.
Treasury yields on 10 years of close surveillance stood at 1.32% late Friday, just above what it was a week ago.
Next week’s calendar
Monday
Labor Day holiday
Tuesday
Earnings: Coupa Software, Casey’s general store
10:00 h Quarterly financial report
Wednesday
Earnings: Korn Ferry, Lululemon Athletica, GameStop, AeroVironment
7:00 am Weekly mortgage applications
10:00 h JOLTS
1:10 pm New York Fed Chairman John Williams
2:00 pm Fed’s beige book
6:00 pm Dallas Fed President Robert Kaplan City Hall
Thursday
Earnings: Hovnanian companies, American outdoor brands, Sumo Logic, Zscaler, Verint Systems, Dave & Buster’s
8:30 am Unemployment claims
10:00 h Q2 Quarterly services
11:05 am Chicago Fed Chairman Charles Evans
2:00 pm Dallas Fed Kaplan, Boston Fed Chairman Eric Rosengren, and Minneapolis Fed Chairman Neel Kashkari
Friday
Earnings: Kroger
8:30 am PPI
10:00 am Wholesale trade