Read on for Michael Kramer's article or watch the video above for RRG Research’s analysis of major indices and tech stocks.
Welcome to Michael Kramer’s pick of the top three market events to look out for in the week ahead.
US markets have realised that they will not be getting seven rate cuts in 2024. With inflation on the rise again, they may be lucky to get one. The coming week is likely to clarify how many rate cuts will occur this year. The answer could be zero. If key economic data – including ISM reports, JOLTS, the ADP report, and Friday’s non-farm payrolls print – all come in strong, rate cuts in 2024 will be hard to come by. Company earnings are set to remain under the spotlight this week too, with Apple’s results on Thursday the headline act.
US Federal Reserve interest rate decision
Wednesday 1 May: The Federal Reserve’s two-day interest rate meeting, which concludes on 1 May, is not expected to bring about a change in monetary policy. However, we may learn where policy is heading. In particular, watch out for any announcements on changes to the Fed's balance sheet run-off, and the rising odds that the Fed may taper that run-off. Additionally, Fed chair Jerome Powell is likely to adopt a more hawkish tone towards monetary policy, marking a U-turn on the dovish pivot that the Fed made in December, which now looks like a blunder.
The outcome of the rate meeting may affect the front of the yield curve, with the US two-year Treasury note approaching what could be a significant breakout level. If the two-year rate – which stood at about 4.991% on Friday – pushes above 5.05%, it could break even higher, possibly towards 5.25%.
Apple Q2 earnings
Thursday 2 May: Apple’s fiscal second-quarter results are expected to show that earnings fell by 1.3% year-on-year to $1.50 a share as revenue decreased by 4.8% to $90.3bn, based on analysts’ estimates. However, the news may not be uniformly bad. While iPhone sales are forecast to have fallen by 11% in Q2 to $45.7bn, services revenue is forecast to have grown by 11.4% to $23.3bn. Gross margins for the quarter are seen expanding to 46.6%, up from 43% in the year-ago period.
Apple shares enter this earnings period down 8% year-to-date. Having closed at $169.89 on Thursday, the stock sits just above an important technical support level at $166. A breach below this support after the results could open a path to much lower levels, with $158 as the next support level, and no support beyond that until $148. A break of support would also confirm a double-top pattern, suggesting that a plunge towards $130 cannot be ruled out in the weeks and months ahead.
To make a meaningful move higher, the shares would first need to climb above resistance at around $180. Such a move could open a route to higher levels.
Note: Michael Kramer and his clients at Mott Capital Management own shares in Apple.
US non-farm payrolls
Friday 3 May: The latest labour market report is expected to show that the US added 250,000 jobs in April, with the unemployment rate set to be unchanged at 3.8%. Meanwhile, growth in average hourly earnings is expected to be stable at 0.3% month-on-month and 4.1% year-on-year.
The GDP report on 25 April showed that the US economy grew at an annualized rate of 1.6% in Q1, down from 3.4% in the previous quarter and well below economists’ expectations of 2.4%. The downside surprise pushed the rate on the US 10-year Treasury note over the hurdle at 4.65%. If there is anything that can propel the 10-year rate higher from here – perhaps to the 5% mark – it would be a hotter-than-expected jobs report on Friday.
The report would be considered ‘hot’ if it shows both solid employment gains and strong wage growth during April. From a technical analysis standpoint, there are almost no major resistance points between the 10-year's current position – near 4.7% – and the 5% level. If the breakout is for real, then a move to 5% is the next logical step.
Key economic and company events
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday
• Germany: April consumer price index (CPI)
• Japan: March unemployment rate; March retail trade
• Results: Domino's Pizza (Q1), ON Semiconductor (Q1)
Tuesday
• Australia: March retail sales
• China: April manufacturing purchasing managers’ index (PMI), services PMI
• Eurozone: Q1 gross domestic product (GDP); April CPI
• France: Q1 GDP
• Germany: March retail sales; April unemployment rate; Q1 GDP
• New Zealand: Q1 unemployment rate
• Results: Advanced Micro Devices (Q1), Amazon (Q1), Coca-Cola (Q1), Eli Lilly (Q1), McDonald's (Q1), St James’s Place (Q1), Starbucks (Q2), Stryker (Q1), Super Micro Computer (Q3)
Wednesday
• Japan: Bank of Japan monetary policy meeting minutes
• UK: April Nationwide housing prices
• US: Federal Reserve interest rate decision; April ADP employment report; April ISM manufacturing PMI; March job openings and labor turnover survey (JOLTS)
• Results: Haleon (Q1), Mastercard (Q1), Next (Q1), Pfizer (Q1), Qualcomm (Q2)
Thursday
• Australia: April trade balance
• Switzerland: April CPI
• US: Initial jobless claims to 26 April
• Results: Apple (Q2), Coinbase (Q1), ConocoPhillips (Q1), Shell (Q1), Standard Chartered (Q1), Smiths News (HY)
Friday
• Eurozone: March unemployment rate
• US: April jobs report, including non-farm payrolls; April ISM services PMI
• Results: InterContinental Hotels Group (Q1), Trainline (FY)
Note: While we check all dates carefully to ensure that they are correct at the time of writing the above announcements are subject to change.
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