The U.S. stock market seems set for a constructive start this morning, as the second quarter commences. This week, investors will be paying close attention to the nation’s inflation situation, while looking for signs that the economy and the labor market are holding steady. As we were writing this update, the S&P 500 Index futures were up slightly in pre-market trading.
In economic news, investors may still be reacting to a recently released inflation report. Late last week, the PCE (Personal Consumption Expenditures) Price Index showed that prices rose 2.5% during the month of February, year over year. This reading suggests that inflation is starting to normalize.
This week, investors will receive reports on manufacturing activity, construction spending, and factory orders. Further, a number of Federal Reserve officials, including Chairman Jerome Powell, will be making speeches in the coming days. Investors will probably be looking over these remarks to better gauge where the economy and interest rates might be headed. Finally, the main event will take place Friday morning when the government publishes the March employment report. Most analysts expect that roughly 200,000 jobs were added to the economy last month, down from February’s number, but still an impressive reading. The headline unemployment rate is also expected to dip slightly to the 3.8% mark. It should be noted that the monthly employment report is probably one of the most important releases and can have a definite impact on trading.
In the corporate arena, not too many large companies are slated to deliver profit reports this week. However, today we will hear from apparel manufacturer PVH Corp. (PVH). Tomorrow, payroll processor Paychex (PAYX) will weigh in with its numbers. In addition, food producer Conagra Brands (CAG) will post its results later this week.
The stock market logged a better-than-10% advance during the first quarter. This strong performance probably has traders wondering if further gains can be achieved without a period of consolidation. It is positive to see that the economy is holding up well, inflation is less problematic, and the Federal Reserve may soon be able to relax its stance. However, many stocks seem extended at this point, with their P/E multiples looking somewhat elevated, which suggests caution may be warranted. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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