AI and tech stocks have dominated recent market commentary, but the focus will be back on the economy this week.
At a Glance
• The news: A big batch of economic data drops this week, including the highly anticipated May employment report on Friday.
• The context: The war in Iran has intensified concerns around inflation and the macro backdrop, but the state of the labor market remains a big question mark.
• Your move: Be prepared for a return to macro-driven volatility. Any surprise weakness in the jobs numbers could offer hope for future interest rate cuts, boosting bonds, real estate, and low volatility stocks. Conversely, signs of resilience might fuel speculation about future interest rate hikes, which could hurt growth stocks.
The marquee data will come Friday, when we get the government's May employment report.
Although investors have paid closer attention to the employment data since the job market started stagnating last year, the recent increase in inflation adds another layer of interest. So the market might assign a touch less importance to these numbers.
That said, the Federal Reserve has a dual mandate to consider both employment and inflation when determining benchmark interest rates. Any surprises from the data might scramble what the Fed has signaled, which has ramifications for investors and consumers alike.
Earlier in the week, we'll get the ISM Manufacturing and Services PMIs. These surveys serve as a pulse check on what businesses are seeing with respect to demand, price trends, and supply chains.
Given the recent spike in oil prices, investors will be especially focused on the inflation backdrop. We already know raw material and shipping costs have increased, but whether or not firms are passing those costs onto consumers is unclear. And while evidence of price increases would probably be viewed favorably by investors, it would mean even greater strain on consumers. And that isn't ideal when consumer spending accounts for two-thirds of the U.S. economy.
On the Docket
Monday
• May ISM Manufacturing PMI: This index from the Institute for Supply Management tracks how purchasing managers across the manufacturing sector feel about the business environment.
• April Construction Spending: Construction data is a leading indicator of business activity.
• Earnings: Hewlett Packard Enterprise (HPE)
Tuesday
• April Job Openings: A key measure of business demand for labor is the number of job openings, since reducing openings is easier and preferable to layoffs.
• May Wards Total Vehicle Sales: Cars are a big ticket item for consumers, so underlying vehicle sales trends can help shine a light on demand for durable goods.
• Earnings
◦ Major companies: Palo Alto Networks (PANW)
◦ Others: Dollar General (DG), Ulta Beauty (ULTA)
Wednesday
• May ADP Monthly Employment Report: This survey, usually released a day or two before the official government jobs report, offers insight into private sector employment trends.
• May S&P Global US PMIs: These indexes track how purchasing managers across different industries feel about the business environment.
• May ISM Services PMI: This index from the Institute for Supply Management tracks how purchasing managers across different services industries feel about the business environment.
• April Factory and Durable Goods Orders: These metrics give insight into underlying trends for leading cyclical indicators.
• Fed Beige Book: This report is released eight times per year and tracks the state of the economy based on qualitative information.
• Earnings
◦ Major companies: Broadcom (AVGO), CrowdStrike (CRWD)
◦ Others: Medtronic (MDT), Veeva Systems (VEEV)
Thursday
• May Challenger Job Cuts: The firm Challenger, Gray & Christmas tracks the number of layoff announcements each month by sector.
• 1Q Productivity and Unit Labor Costs: These measures provide a breakdown of how productive workers were per hour of work and at what cost.
• Earnings: Ciena (CIEN), Lululemon Athletica (LULU), Brown-Forman (BFB), Cooper Companies (COO)
Friday
• May Employment Situation Summary: This monthly blockbuster release from the Labor Department gives a comprehensive look at employment, wages, and hours worked in the previous month.
• April Consumer Credit: Borrowing activity gives insight into broader economic activity.
Note: Companies with at least $100 billion in market capitalization are shown in the "Major companies" sections.
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