What you should know this week

Investors should see concerns about the debt ceiling ease over the coming week during a holiday-shortened week.

This week’s event will be interrupted by Friday’s May jobs report as the focus shifts from US default fears to the next Federal Reserve interest rate announcement on June 14th.

Late Saturday, President Biden and House Speaker Kevin McCarthy announced an interim debt ceiling agreement that will last two years, with lawmakers now beginning to pass that legislation before the June 5 deadline.

Outside of Friday’s jobs report, data on the housing market and consumer confidence will also be in focus alongside some corporate earnings reports. US markets will remain closed on Monday for Memorial Day.

Uncertainty about the US debt ceiling has played a bigger role in investor talks over the past few weeks than market moves, with hype surrounding the current AI boom propelling tech stocks higher last week. And that conversation should fade this week, giving way to more AI thought leaders who can take more oxygen into the room.

Chipmaker Nvidia (NVDA) gains propelled the company toward a $1 trillion market cap and fueled a surge in the technology sector. The Nasdaq Composite (^IXIC) is up 2.5% last week, while the S&P 500 (^GSPC) is up 0.3% and the Dow (^DJI) is down 1%.

According to data from Bloomberg, Friday’s May jobs report is expected to show that 180,000 nonfarm payrolls were added to the US economy last month and the unemployment rate edged up to 3.5%.

In April, the US economy added an unexpectedly strong 253,000 nonfarm payrolls, while the unemployment rate fell to 3.4%, the lowest since May 1969.

This report will be one of several key data points to be reviewed by the Federal Reserve ahead of its next Federal Open Market Committee meeting, scheduled for June 13-14.

Expectations for the central bank’s next move are increasingly mixed as economic data continues to come out stronger than expected. Following last week’s inflation data, CME Group data showed that markets are pricing in a more than 50% chance of the Fed raising interest rates by another 0.25% on June 14; In late April, investors thought the Fed was more likely to cut rates than they were to hike in June.

“Inflation is more than double the target rate of 2% and the unemployment rate is lower than all FOMC participants’ estimate of the longer-term rate,” Bank of America’s U.S. economics team, led by Michael Gapen, wrote in a Friday Notice to Customers .

“We will receive another job report (on June 2nd) and another CPI print (June 13th) before the June decision. And one more before the July meeting. Broadly speaking, we expect non-farm payrolls to have risen by more than 200k, a steady or falling unemployment rate and core CPI around 0.4% mom would prompt further tightening .”

On the corporate side, next week’s focus will be on earnings from technology and retail companies, including the likes of HP (HPQ), Salesforce (CRM), Okta (OKTA), Dell (DELL), Macy’s (M) and Lululemon (LULU). report quarterly results.

These reports will shed further light on the mixed consumer picture this earnings season. Some companies have warned of a discretionary slowdown, while others suspect the apparel market is booming.

Broadly speaking, S&P 500 companies beat Wall Street estimates, although the index posted a second straight decline in overall earnings. According to data from FactSet, first-quarter earnings for the S&P 500 fell 2.2%, while 81 companies have issued negative EPS forecasts, the highest since the third quarter of 2019.

FILE - Jensen Huang, co-founder, president and CEO of Nvidia speaks at Taiwan Semiconductor Manufacturing Company's facility under construction in Phoenix on Tuesday, December 6, 2022.  Nvidia shares soared early Thursday after the chipmaker forecast a huge jump in sales in the next quarter, noting in particular chip demand for AI-related products and services.  (AP Photo/Ross D. Franklin, file)

Jensen Huang, co-founder, president and CEO of Nvidia speaks Tuesday, December 6, 2022 at the Taiwan Semiconductor Manufacturing Company’s facility under construction in Phoenix. (AP Photo/Ross D. Franklin, file)

Investors will also get more earnings results from the AI ​​industry with C3a.i. (AI) is expected to announce its results on Wednesday. The tech company’s shares have been one of the biggest beneficiaries of the AI ​​boom, soaring more than 190% so far this year.

And while AI announcements had already caused excitement during Q1 earnings season, investor hype peaked last week.

On Thursday, Nvidia stock rose nearly 25% as the company released revenue guidance for the current quarter that came in more than 50% ahead of Wall Street estimates. A day later, shares of Marvell Technology (MRVL) surged more than 30% after the company forecast that AI sales could double over the next year.

“$1 trillion in installed global data center infrastructure will transition from general purpose to accelerated computing as companies struggle to apply generative AI to every product, service and business process,” Nvidia CEO Jensen Huang said Thursday. “We are significantly increasing our supply to meet the increasing demand.”

And investors have begun to view the AI ​​hype as a contributing factor to the market’s overall rally this year, which has seen the Nasdaq rise 24%.

“US markets are being driven by the Al theme, which tends to increase interest rate sensitivity even further,” Citi strategists wrote in a note to clients last week. “Obviously this theme is very specific to the US market and as such we expect the US to outperform when the Fed is done.”

Citi added, “While price action in AI-related stocks has clearly been extreme, especially at a time when monetized use cases are still in the future and barriers to entry aren’t all that high, we still believe it’s still going to be.” is early to mitigate that.” Steps before the AI ​​is even advanced enough to be able to disappoint expectations.”

And with Fed expectations still far from reaching consensus as of late, the “safest” place for investors in the summer of 2023 appears to be the AI ​​hype train.

Bank of America Global Research’s Michael Hartnett wrote on Friday, “No belief in the 2023 macro narrative means strong belief in the new AI micro-narrative.”

weekly calendar

Monday

The markets are closed for Memorial Day.

Tuesday

Economic data: Dallas Fed Manufacturing Activity, May (-17 expected, -23.4 before); FHFA Home Price Index, March (+0.2% exp. +0.5% exp); S&P CoreLogic Case-Shiller, 20-City Composite, Monthly Comparison, March (-0.05% exp. +0.06% previously); S&P CoreLogic Case-Shiller 20-City Composite, YoY, March (-1.70% exp. +0.36% yoy); Conference Board Consumer Confidence, May (99.1 exp., 101.3 so far)

Merits: Box (BOX), HP Inc. (HPQ), Hewlett Packard Enterprise (HPE), U-Haul (UHAL)

Wednesday

Economic data: MBA mortgage applications (previously -4.6%); MNI Chicago PMI, May (47.0 expected, 48.6 before); JOLTS Jobs, April (9.48 million expected, 9.59 million before); Federal Reserve Beige Book

Merits: Advance Auto Parts (AAP), Capri Holdings (CPRI), Chewy (CHWY), Crowdstrike (CRWD), C3.ai (AI), Nordstrom (JWN), Okta (OKTA), Purestorage (PSTG), Salesforce (CRM)

Thursday

Economic data: Challenger downs YoY, May (+175.9% yoy); Unit labor costs, first quarter final (+6.2% exp. +6.3% so far); Non-farm productivity, first quarter final (-2.6% expected, previously -2.7%); Weekly initial jobless claims (235,000 expected, 229,000 so far)

Merits: Broadcom (AVGO), Dell Technologies (DELL), Dollar General (DG), Five Below (FIVE), Hormel Foods (HRL), Land’s End (LE), Lululemon (LULU), Macy’s (M), Zscaler (ZS)

Friday

Economic data: Nonfarm payrolls, April (+180k expected, +253k before); Unemployment rate, April (3.5% expected, previously 3.4%); Monthly Average Hourly Earnings, May (+0.3% expected, +0.5% before); YoY Average Hourly Earnings, May (+4.4% exp. +4.4% yoy); Average weekly hours worked, May (34.4 expected, 34.4 before); Labor force participation rate, May (62.6% expected, previously 62.6%)

Merits: No remarkable earnings.

Monday

The markets are closed for Memorial Day.

Tuesday

Economic data: Dallas Fed Manufacturing Activity, May (-17 expected, -23.4 before); FHFA Home Price Index, March (+0.2% exp. +0.5% exp); S&P CoreLogic Case-Shiller, 20-City Composite, Monthly Comparison, March (-0.05% exp. +0.06% previously); S&P CoreLogic Case-Shiller 20-City Composite, YoY, March (-1.70% exp. +0.36% yoy); Conference Board Consumer Confidence, May (99.1 exp., 101.3 so far)

Merits: Box (BOX), HP Inc. (HPQ), Hewlett Packard Enterprise (HPE), U-Haul (UHAL)

Wednesday

Economic data: MBA mortgage applications (previously -4.6%); MNI Chicago PMI, May (47.0 expected, 48.6 before); JOLTS Jobs, April (9.48 million expected, 9.59 million before); Federal Reserve Beige Book

Merits: Advance Auto Parts (AAP), Capri Holdings (CPRI), Chewy (CHWY), Crowdstrike (CRWD), C3.ai (AI), Nordstrom (JWN), Okta (OKTA), Purestorage (PSTG), Salesforce (CRM)

Thursday

Economic data: Challenger downs YoY, May (+175.9% yoy); Unit labor costs, first quarter final (+6.2% exp. +6.3% so far); Non-farm productivity, first quarter final (-2.6% expected, previously -2.7%); Weekly initial jobless claims (235,000 expected, 229,000 so far)

Merits: Broadcom (AVGO), Dell Technologies (DELL), Dollar General (DG), Five Below (FIVE), Hormel Foods (HRL), Land’s End (LE), Lululemon (LULU), Macy’s (M), Zscaler (ZS)

Friday

Economic data: Nonfarm payrolls, April (+180k expected, +253k before); Unemployment rate, April (3.5% expected, previously 3.4%); Monthly Average Hourly Earnings, May (+0.3% expected, +0.5% before); YoY Average Hourly Earnings, May (+4.4% expected, +4.4% so far); Average weekly hours worked, May (34.4 expected, 34.4 before); Labor force participation rate, May (62.6% expected, previously 62.6%)

Merits: No remarkable earnings.

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