The S & P 500 and the Dow Jones Industrial Average pressed higher this holiday-shortened week, as the Nasdaq Composite pulled back slightly — the action that shows a broadening out of demand for stocks outside of the mega-caps with exposure to the generative AI mania. It also likely reflects some end-of-quarter rebalancing activity as large fund managers look to trim year-to-date winners and rotate into the under-performers to maintain their target weightings. For the quarter, the S & P 500 rose roughly 10%, its best first-quarter gain since 2019, when it rallied 13.1%. The Dow notched a 5.6% return, while the Nasdaq increased 9.1%. March was the fifth straight month of gains for all three averages. Looking back this week, new home sales in February came in a bit lower than expected, while pending home sales were ahead of expectations, up 1.6% monthly vs. an expected decline of 1%. The final reading on fourth-quarter GDP came in at a seasonally adjusted annual rate of 3.4% quarter over quarter, a bit above the 3.3% consensus according to FactSet and up from 3.2% on the second estimate. Finally, the February personal spending and income report on Friday increased 2.8% on an annual basis and was up 0.3% from a month ago, both in line with expectations. The markets were closed for Good Friday so we didn’t get a reaction from Wall Street. However, our early take on the data is it supports the Fed’s decision to maintain its current policy. The annual reading is above the 2% target set by the central bank but is a slight deceleration from the 2.9% annual rate in December and January. We are slowly but surely trending in the right direction. Looking ahead to next week, it’s all about the macroeconomic updates as the first quarter earnings season is mostly over. 1. Jobs report. The main event comes on Friday with the important March nonfarm payrolls. As members know, this is one of the most closely watched of all macroeconomic releases. That’s because it speaks directly to one of the Federal Reserve’s primary mandates: to ensure low unemployment. But it also matters because of what it says about price stability. Stable prices require that consumers make enough money to keep spending, but not so much money that they are flush enough with cash to absorb and support rapidly rising prices. That’s why — in addition to the headline number — the unemployment level and annual increase in hourly wages are so closely monitored. At this point, these two metrics are arguably more important than the headline number. We want low unemployment along with annual wage inflation that’s enough to keep people working while maintaining or regaining purchasing power. However, we don’t want wage inflation so strong that it supports elevated levels of inflation or causes the Fed to get more hawkish in its outlook for rates. Currently, economists are expecting to see 180,000 payroll additions, a 3.8% unemployment rate (down from 3.9% in February), and a 4.1% annual increase in hourly wages (down from 4.3% in February). Ahead of the nonfarm payrolls report, on Wednesday, is the ADP employment report, which is closely monitored mostly to help estimate Friday’s report. The market is looking for 150,000 additions. On Tuesday, the JOLTS (job openings and labor turnover survey) is the least emphasized of the three but does provide some insight into the tightness of the labor market. 2. Manufacturing updates. Outside of the labor market, the March ISM manufacturing PMI numbers hit Monday (48.5% expected), the factory orders report (+1% monthly expected) and the March ISM services PMI numbers on Wednesday (52.5% expected). Regarding the ISM reports, we remind members that the “What Respondents Are Saying” section is a great way to glean quick insights into what management teams in various industries are seeing. The ISM reports show the rate of contraction or expansion, measured by the distance from a 50-level benchmark. The further below 50, the faster the contraction; the further above 50, the faster the rate of expansion. 3. Earnings. No club names report earnings next week. However, there are a few reports worth watching. Last week, Paychex was forced to reschedule its earnings release to this Tuesday due to a scheduling conflict. As one of the nation’s largest payroll processors, with a focus on small and medium-sized businesses, Paychex can signal what’s happening in the labor market. The U.S. is a consumption-driven economy, so low unemployment (and sustained buying power) is key to the Fed being able to wage its war on inflation while also avoiding a recession. Though food price inflation is excluded from the Fed’s preferred measure of inflation, the core PCE price index, the cost of food is nonetheless a crucial factor to monitor as it represents an unavoidable cost to consumers that in turn impacts their ability to spend elsewhere. As a result, it will be interesting to see what Cal-Maine Foods and Conagra Foods have to say regarding input costs and selling price dynamics when they report earnings on Tuesday and Thursday, respectively. For insight into discretionary spending and where consumers are focusing their buying power, we have quarterly results from PVH Corp , the parent company of Calvin Klein and Tommy Hilfiger, on Monday, and from the experiential sports bar, restaurant, and arcade chain Dave & Buster’s on Tuesday. In addition, denim and clothing maker Levi Strauss reports Wednesday. Monday, April 1 10:00 a.m. ET: ISM Manufacturing PMI After the bell: PVH Corp. (PVH), Canoo (GOEV) Tuesday, April 2 10:00 a.m. ET: Factory Orders 10:00 a.m. ET: JOLTS Job Openings Before the bell: Paychex (PAYX) After the bell: Dave & Busters (PLAY), Cal-Maine Foods (CALM) Wednesday, April 3 8:15 a.m. ET: ADP Employment 10:00 a.m. ET: ISM Services PMI Before the bell: Acuity Brands (AYI) After the bell: BlackBerry (BB), Levi Strauss (LEVI) Thursday, April 4 8:30 a.m. ET: Initial Jobless Claims Before the bell: Conagra Brands (CAG), Lamb Weston (LW), AngioDynamics (ANGO), Simply Good Foods (SMPL) Friday, April 5 8:30 a.m. ET: Nonfarm Payrolls (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Workers at a restaurant at Grand Central Market in Los Angeles, California, US, on Thursday, Nov. 2, 2023.
Eric Thayer | Bloomberg | Getty Images
The S&P 500 and the Dow Jones Industrial Average pressed higher this holiday-shortened week, as the Nasdaq Composite pulled back slightly — the action that shows a broadening out of demand for stocks outside of the mega-caps with exposure to the generative AI mania.
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