Short week, a new streak, and the jobs report: What to watch in markets this week

A bounce in U.S. stocks last week snapped a seven-week losing streak for the S&P 500 and Nasdaq, while the Dow logged gains for the first time in eight weeks.

These gains ended the longest weekly losing streak in over a decade for the S&P 500 after the index tip-toed into bear market territory. All three major indexes logged weekly gains of at least 5%, buoyed by a batch of upbeat economic data and more positively received earnings reports from the retail sector.

The S&P 500 has snapped a losing streak of this length only three other times in history — 1970, 1980, and 2001 — and twice the index rose 33% over the next 12 months, according to data from LPL Financial.

“Of course, to keep things honest, [performance after] the [decline] in 2001 was rough sledding,” LPL’s Ryan Detrick pointed out; over the next 6 months the S&P 500 fell another 14%.

Wall Street will be off on Monday in observation of the Memorial Day holiday.

Investors are expected to take their cue from a flurry of key employment data in the holiday-shortened final week of May when trading resumes Tuesday.

The Labor Department’s closely-watched jobs report will offer a snapshot of U.S. employment as concerns mount over uncertainty in the economic outlook. May’s jobs data is expected to reflect a slowdown in hiring from a red-hot prior reading of 428,00 jobs, with economists looking for 325,000 jobs added or created last month, per consensus Bloomberg estimates.

With a number of big name companies reporting inflation-related profit pressures and seeing their stocks slide in recent weeks, market participants have grown wary firms could lay off workers and pause hiring to cut costs

A Now Hiring sign at T.J. Maxx in Annapolis, Maryland, on May 16, 2022. (Photo by Jim WATSON / AFP) (Photo by JIM WATSON/AFP via Getty Images)

On the employment front, investors also have the ADP’s report on private payrolls – a precursor to the government’s main jobs report — the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, and weekly jobless claims in the queue.

The consumer confidence index out Tuesday will serve as another important gauge of economic sentiment, with investors keeping a close eye on consumer resilience amid continued talk of recession.

In recent trading days, a favorable batch of quarterly results from major retailers helped at least temporarily mitigate concerns over the toll of inflationary headwinds could take on profit margins.

“Based on their earnings, along with other trends such as declining consumer confidence and real incomes, the consumer suddenly looked much more vulnerable,” Commonwealth Financial Network Chief Investment Officer Brad McMillan said in a note. “As goes the consumer, so goes the economy and ultimately the market.”

NEW YORK, NEW YORK - MAY 23: Traders work on the floor of the New York Stock Exchange (NYSE) on May 23, 2022 in New York City. After a week of steep losses, markets were up in Monday morning trading. (Photo by Spencer Platt/Getty Images) — NEW YORK, NEW YORK – MAY 23: Traders work on the floor of the New York Stock Exchange (NYSE) on May 23, 2022 in New York City. After a week of steep losses, markets were up in Monday morning trading. (Photo by Spencer Platt/Getty Images)

Indeed, if company forecasts hold true, macroeconomic pressures are likely to show up more meaningfully in second quarter results.

The term “inflation” was mentioned at least once during 398 earnings calls held by S&P 500 companies from March 15 through May 24, research from FactSet indicated, with a similar number – 338 – mentioning “supply chain” in roughly the same period.

Moreover, the S&P 500 reported earnings growth of 9%, marking the lowest since the fourth quarter of 2020, and 68 companies tracked by the index provided negative EPS guidance for Q1, the highest since year-end quarter of 2019, per FactSet.

“If the economy is nearing recession’s door, job layoffs will climb further, and it is too early to rule out more staff cuts in the weeks and months ahead,” FWDBONDS Chief Economist Christopher Rupkey said in a recent note. “High-flying tech companies have seen their share prices plummet which will force management to tighten their belts, and the biggest expense for most companies is always labor.”

Earnings season is winding down, but more reports are due out in the four-day week, with companies including Salesforce.com (CRM), GameStop (GME) Chewy (CHWY), and HP (HPQ) set to report quarterly results.

“This is nothing more than a bear bounce in our opinion,” Eddie Ghabour, co-founder and managing partner of Key Advisors Group, told Yahoo Finance Live. “When you look at these bounces we’ve had, they’ve been on very light volume, there’s not a lot of conviction.

Ghabour also elaborated that data that has resulted in steep selling across equities in past weeks was first quarter data, and that figures for the current quarter may come in worse, warning of a “very treacherous market in the next few months.”

—

Economic calendar

Monday: Memorial Day. No notable reports scheduled for release.

Tuesday: FHFA House Pricing Index, month-over-month, March (2.0% expected, 2.1% during prior month); House Price Purchasing Index, quarter-over-quarter, Q1 (3.3% during prior quarter); S&P CoreLogic Case-Shiller 20-City Composite, month-over-month, March (1.90% expected, 2.39% during prior month); S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, March (19.85% expected, 20.20% during prior month); S&P CoreLogic Case-Shiller U.S. National Home Price Index, year-over-year, March (19.80% during prior month); MNI Chicago PMI, May (55.5 expected, 56.4 during prior month); Conference Board Consumer Confidence, May (103.5 expected, 107.4 during prior month); Conference Board Present Situation, May (152.6 during prior month); Conference Board Expectations, May (77.2 during prior read); Dallas Federal Reserve Manufacturing Activity, May (1.5 expected, 1.1 during prior month)

Wednesday: MBA Mortgage Applications, week ended May 27 (-1.2% during prior week); S&P Global U.S. Manufacturing PMI, May final (57.5 expected, 57.5 during prior month); Construction Spending, month-over-month, April (0.6% expected, 0.1% during prior month); ISM Manufacturing, May (54.5 expected, 55.4 during prior month); ISM Prices Paid, March (80 expected, 84.6 prior month); ISM New Orders, May (53.5 during prior month); ISM Employment, May (50.9 during prior month); JOLTS job openings, April (11.400 million expected, 11.549 million during prior month); WARDS Total Vehicle Sales, May (14.30 million expected, 14.29 million prior month); Federal Reserve Releases Beige Book

Thursday: Challenger Job Cuts, year-over-year, May (6.0% during prior month); ADP Employment Change, May (300,000 expected, 247,000 during prior month); Nonfarm Productivity, Q1 final (-7.5% expected, 7.5% during prior month); Unit Labor Costs Q1 final (11.6% expected, 11.6% final); Initial Jobless Claims, week ended May 28 (210,000 expected, 210,000 during prior week); Continuing Claims, week ended May 21 (1.346 million expected, 1.346 million during prior week); Factory Orders Excluding Transportation, April (2.5% during prior month, revised to 2.1%); Factory Orders, April (0.7 expected, 2.2% during prior month, revised to 1.8%); Durable goods orders, April final (0.4% expected, 0.4% during prior month); Durables excluding transportation, April final (0.3% during prior month); Non-defense capital goods orders excluding aircraft, April final (0.3% during prior month); Non-defense capital goods shipments excluding aircraft, April final (0.5% expected, 0.8% during prior month)

Friday: Change in Nonfarm Payrolls, May (325,000 expected, 428,000 during prior month); Change in Private Payrolls, May (303,000 expected, 406,000 during prior month); Change in Manufacturing Payrolls, May (37,000 expected, 55,000 during prior month); Unemployment Rate, May (3.5% expected, 3.6% during prior month); Average Hourly Earnings, month-over-month, May (0.4% expected, 0.3% during prior month); Average Hourly Earnings, year-over-year, May (5.2% expected, 5.5% prior month); Average Weekly Hours All Employees, May (34.6 expected, 34.6 during prior month); Labor Force Participation Rate, May (62.3% expected, 62.2% during prior month); Underemployment Rate, March (7.0% prior month); S&P Global Manufacturing PMI, May final (53.5 expected, 53.5 during prior month); S&P Global U.S. Composite PMI, May final (53.8 expected, 53.8 during prior month); ISM Services Index (56.5 expected, 57.1 during prior month)

—

Earnings calendar

Monday

Memorial Day. No notable reports scheduled for release.

Tuesday

Before market open: Kirkland’s (KIRK)

After market close: HP (HPQ), Salesforce.com (CRM), Victoria’s Secret (VSCO), ChargePoint (CHPT), Ambarella (AMBA)

Wednesday

Before market open: No notable reports scheduled for release.

After market close: GameStop (GME), Chewy (CHWY), PVH (PVH), Hewlett Packard Enterprises (HPE), Pure Storage (PSTG), American Superconductor (AMSC)