Weekly Market Analysis: Recap and Forecast. The Week of May 6, 2024

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Like we stated, we expected market volatility last two weeks as result of Fed Chair press conference and economic data. Data released last Friday showed weaker-than-expected U.S. jobs growth in April. The economy added only 175,000 new jobs last month versus the forecast an increase of 240,000, marking a 6-month low. The unemployment rate, meanwhile, edged up to 3.9% from 3.8%, marking the 27th month in a row it’s been below 4%. That data, however, didn’t trigger alarm bells; instead, stocks rallied as investors penciled in a “Goldilocks” scenario, with the economy running neither too hot nor too cold, that would be welcomed by Fed policymakers. According to some economists, “the broad jobs report indicates an ongoing rebalancing in labor market conditions. What we are seeing is a moderate labor demand, historically low employment rates, and cooling-down wage growth environment. That is the ideal combo.” The jobs report adds to evidence showing modest labor weakness with slower growth, which may allow the Fed to proceed with rate cuts.

If unemployment and job insecurity start going up, then that would typically cause the consumers to pull back. The stress on consumers has weighed on some companies but has yet to impact the broader stock market.  Higher interest rates have affected mostly those with lower income, but their total consumption is relatively small. Therefore, the risk for the Fed to react to increasing distress among lower income households, while inflation stays relatively high, is low because that is not a traditional stagflation metric. As for now, the market seems to be content with the fact of fewer rate cuts for this year.

This week, investors will be expecting comments from several Federal Reserve officials, including Richmond Fed President Tom Barkin, New York Fed President John Williams and Fed Gov. Lisa Cook. This week also includes the release of Consumer Credit on Tuesday and U of MI Consumer Sentiment on Friday. Then next week, we will have PPI and CPI reports coming out. After 2 busy weeks of earnings, there 56 S&P 500 companies report earnings this week, with notable reports from $PLTR, $DIS, $DDOG, $UPST, $LYFT, $OXY, $TWLO, $SHOP, $AFRM, $ABNB, $ARM, $TTD, $RBLX, $MARA. We may a few good trades out of this list.

$SPY & $QQQ closed another week of whip-splash as projected. $SPY went from $510 down to $500, then back to $510. $QQQ went from $430 down to $420, then back over $430. Currently, $SPY is right at its 50sma, now acting as resistance at around $512. If $SPY can sustain $512, it may trade back up to $515, then $520-$521, then retest its ATH. If it fails to hold $510, it could go back down to $505, then $500 again. $QQQ is also right at its 50sma resistance $436 area. If $QQQ can break over this level, it should trade to $440-$442 then $445-$446. If it gets rejected at $436 and it could go back down to $432-$430 then $426-$425 and possible retest $421-$420 area.

With lack of catalyst this week, we may expect the market to trade in its range and possible some whipsaw reactions to Fed presidents’ speeches. We will focus on our FAANG’s stocks and some earnings this week. Until then, have a great month of May and enjoy Spring Season. Namaste!!!