US stocks trend higher, Fed Chair Powell and financials on tap this week

  • Fed Chair Jerome Powell scheduled to talk this Wednesday, Thursday, and Friday.
  • Q1 Earnings season picks up steam this week with select financials reporting Q1 results Friday.
  • US equity markets regain “confirmed uptrend” status after a solid week.
  • The European Central Bank (ECB) sets monetary policy for member states on Wednesday.
  • EU emergency summit on Brexit scheduled Wednesday.
  • US/China trade talks continue.
  • Eurozone industrial production figures for February are released on Friday. January’s results reflected a 1.4% gain over December but the year-over-year results were decidedly negative at -1.1%.

March Employment Report provides investors with a degree of renewed confidence:

Nonfarm Payrolls +196K

Unemployment Rate 3.8%

Manufacturing – 6k

LFPR 63%

AHE 0.1%

Factory Orders for February are due out this morning. Econoday consensus is -0.5% versus January’s 0.1%. The NFIB Small Business Optimism Index for March is due out Tuesday. Econoday consensus is 102 – nearly matching February’s 101.7 reading.

On Wednesday, Fed Chair Jerome Powell embarks on 3 days of talks – unquestionably the most important theme of the financial week, given recent Fed guidance that lays out a healthy domestic economic narrative for the balance of 2019 with little chance of a change in the Fed’s monetary policy narrative. Also on Wednesday, CPI data for March will be released by the Bureau of Labor Statistics. CPI M/M is expected to be 0.3% versus February’s 0.2%. On a Y/Y basis, Econoday consensus CPI is 1.8%.

The EIA Petroleum Status Report for the week ending 4/5 will be released on Wednesday. Last week’s report saw crude oil inventories rise 7.2M bbl, while gasoline and distillate inventories contracted by 1.8M and 2.0M bbls, respectively. Continuing signs of expansion in the US economy, Tripoli’s counterattack on rebels crimping Libya’s crude production, and OPEC supply constraints have acted to lift prices 48% since trading to a 52-week low on December 24 of last year.

Weekly Jobless Claims are released Thursday. There appears to be no letup in the strength of the job market here in the US. Last week the weekly total for the previous week was 202k – remaining at a 49-year low. Econoday consensus for this week’s release is 211k.

Given the strength of the March Employment Report – released last Friday – the historically low weekly jobless claims numbers make perfect sense. The March Employment Report was significantly stronger than consensus and indicates that February’s shortfall in employment gains may well have been an aberration. Econoday consensus for March was 170k. 196k jobs were added to the workforce. Additionally, the previous month’s totals were revised slightly higher to 33k from the initial 20k. The unemployment rate remained at cycle lows, though manufacturing saw a loss of 6k positions while the average hourly earnings vertical on a Y/Y basis reflected a drop from 3.4% to 3.2%. The loss of manufacturing jobs for the month was a first in over a year.

The Producer Price Index – Final Demand (PPI-FD) for March is out Thursday. With our economic cycle potentially in its final stages in coming quarters, investors are keeping an eye on inflation as measured by the PPI. Slackening prices would provide support for a narrative that speaks to a pending cycle-end. February’s weaker than expected reading of 0.1% appeared to confirm the late stage cycle of our expansion. That thesis was at least in part confirmed by the weaker than expected February monthly employment report as well. However, Econoday consensus for March’s report is 0.3%, which would reflect an uptick in prices and a reversal of sorts. PPI-FD Y/Y is expected to be 1.9% – unchanged from February.

The takeaway:

US equity markets logged another weekly gain last week and in the process moved closer to recapturing record highs and potentially breaking out – though I remain cautious until quarterly corporate results prove otherwise and/or there is a trade deal agreed upon by the United States and China. We should have a better picture of what to expect in coming quarters when we receive quarterly results from financials this Friday. Another important guidepost for what to expect in coming quarters will come from Fed Chair Powell’s talks this week.

Last week’s equity price action which was significant in that leadership, particularly on Friday, was provided by small-cap issues. On Friday alone, the Russell 2000 moved 1% higher – indicating the risk-on is re-emerging in the market place. The Nasdaq Composite (+0.6%) and S&P 500 (+0.5%) also tacked onto recent gains on Friday.

This Week’s Earnings Calendar Highlights:


Shaw Communications (SJR) consensus EPS: $0.22


Delta Air Lines (DAL) consensus EPS: $0.91

MSC Industrial Direct MSM) consensus EPS: $1.26


Fastenal (FAST) consensus EPS: $0.66


First Republic Bank (FRC) consensus EPS $1.23

Infosys Limited (INFY) consensus $0.13

JP Morgan Chase (JPM) consensus $2.34

PNC Financial (PNC) consensus $2.59

Wells Fargo & Co. (WFC) consensus $1.08


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