Traders on the floor of the New York Stock Exchange, June 18, 2021.
As the summer ends, investors’ attention may shift to the possibility that another season of strong earnings is on the horizon, but trading may remain sluggish after the holidays.
Stocks were mixed last week, ahead of the Labor Day long weekend, with the Nasdaq outperforming, a slightly higher S&P 500 and a stable Dow. The best performing sectors were on the defensive, led by real estate investment trusts, utilities, consumer staples and health care.
“You have that Labor Day effect. People are back from vacation, ”said Art Hogan, chief investment strategist at National Securities.
Hogan said investors expect business activity to pick up as a result, but typically slows down during the short holiday week. Investors can assess their summer performance and add locked-in gains or hedges.
“If you look at the past five weeks after Labor Day, which coincided with the market’s all-time high, Labor Day week is the worst for September,” Hogan said.
Friday’s disappointing August jobs report, which added just 235,000 jobs, weighed on sentiment, but stocks were mixed.
Randy Frederick, Managing Director of Charles Schwab, said: “My outlook over the past few weeks has been moderately high, and that seems to be the direction they are heading. Little bearish data is piling up. Worst case scenario. “We’re going to shore. Trading and derivatives.
ignore job reports
Frederick said he expects the market to ignore weak jobs reports, which were about 500,000 lower than expected. “I don’t think there is much fallout over the next week for the most part,” he said. “The markets are down a bit, but I think they took it a lot better than expected.”
Weekly jobless claims data could turn out to be even bigger than usual on Thursday due to a major gap in the August jobs report. Jobs data is important because it is an area in which Federal Reserve Chairman Jerome Powell has said he would like to see more improvements before the central bank decides to slow down its bond purchases.
The market is obsessed with the Fed’s decision to end its $ 120 billion-per-month bond buying program, as this is seen as a precursor to an interest rate hike, although Powell insisted that the two are not related. .
“If it seems [the jobs report] pushed the announcement of a cone to a November meeting instead of a September meeting, and for the most part there was consensus, ”Hogan said.
Hogan said the market will also keep tabs on any inflation-related data, which becomes important after Friday’s rise in the producer price index last month. The consumer price index released next week will be even more important to the market.
John Briggs, head of macro strategy at NatWest Markets, said markets would keep an eye on Fed-related headlines following the disappointing jobs report.
“Next week you have [New York Fed President John] Williams speaks. Taking them would be important. He is considered close to Powell, ”said Briggs. Williams speaks at an economy briefing Wednesday afternoon.
What’s next for stocks
Besides the Fed, the next big event for stocks will be the third quarter earnings season, which kicks off in early October. Prior to that, investors will keep an eye on any company’s earnings comments.
Frederick said strong earnings are pushing stocks forward and may continue to do so. “The market was overvalued for a while until earnings were released, but earnings were great and valuations aren’t as high as they were a few months ago, so we can do that. “
Profits are expected to rise 29.8% for the third quarter, following an astonishing 95.6% growth in the second quarter, according to Refinitiv.
“There is a lack of news related to earnings,” Frederick said, noting that the market could be affected by geopolitical events in the interim.
But even if the market goes down, they don’t expect a massive sell-off because right now whenever there is a setback in the market, buyers keep coming.
upcoming week calendar
Earnings: Coupa Software, Casey’s General Store
10:00 am Quarterly financial report
Earnings: Korn Ferry, Lululemon Athletica, Gamestop, AeroVironment
7:00 a.m. Weekly mortgage application
1:10 p.m. New York Fed President John Williams
2:00 p.m. The Fed’s Beige Book
6:00 p.m. Dallas Fed President Robert Kaplan’s Town Hall
Earnings: Hovnian Enterprises, American Outdoor Brands, Sumo Logic, Zscaler, Verint Systems, Dave & Buster’s
Unemployment claims at 8:30 a.m.
10:00 a.m. Second Quarter Quarterly Services
11:05 a.m. Chicago Fed Chairman Charles Evans
2:00 p.m. Dallas Fed Kaplan, Boston Fed Chairman Eric Rosengren and Minneapolis Fed Chairman Neil Kashkari
8:30 am PPI
Wholesale at 10:00 a.m.