Stocks may continue to rise in the week ahead as investors await Friday’s jobs report

With investors looking ahead to Friday’s jobs report, stocks are likely to extend their latest rally into next week.

All three major stock indexes have risen sharply over the past week, all rising more than 6%.these two S&P 500 and Nasdaq Composite Breaks a seven-week losing streak and an eight-week losing streak Dow Jones Industrial Average.

“I think this is the start of a long-awaited relief rally,” said Sam Stovall, chief investment strategist at CFRA Research.

There are only a handful of gains over the next four days, reports come from Salesforce.com, Hewlett Packard Enterprise and online pet retailers Chewy.

Friday’s May jobs report is the most important data on the calendar, which also includes Wednesday’s ISM manufacturing, job openings data, monthly auto sales and the Fed’s Beige Book.

“I think 325,000 consensus [nonfarm payrolls] Quantity, we can easily beat. But that’s just math,” said Alex Charloff, co-head of investment strategy at Bernstein Private Wealth Management, noting that last month’s data could see a positive revision, as in the most recent report.

Economists expect pace of job creation to slow Starting with 428,000 jobs in April. “You can’t keep growing at this rate, especially with Covid surging. It’s a little air cover for 325,000 people,” Charloff said.

Post-Fed Minutes Recovery

Stocks have been choppy over the past week but have moved sharply higher, especially after the Fed release Minutes of the last meeting.

The S&P 500 rose 6.5% to 4,158, its best weekly performance since November 2020. The Dow rose 6.2%, while the Nasdaq was the top gainer, up 6.8%.

“It’s waiting for some kind of catalyst, and I think it’s getting it from the Fed. Not only has it not gotten more hawkish, but it’s said it’s going to accelerate rate tightening,” Stovall said.

“So I think a lot of investors think they’re getting ahead of the rate hike cycle, which means they might end up taking a pause sometime in the third quarter,” he added. “I think that’s the trigger for the rally. From a breadth and sentiment perspective, the market is just oversold and ripe for some kind of good news and Fed delivery.”

Markets expect the Fed to raise rates by 50 basis points, or half a percentage point, at its next two meetings, Chaloff said. That could mean choppy trading during this period, but he added that when the Fed first resumes its 25-percentage-point rate hike, the market should bounce back strongly.

“I think it’s the early stages of a rebound, but we’re going to have a Fed meeting in June. We’re going to have a Fed meeting in July,” he said. “It’s going to have an impact on the market. When the Fed admits they have a job to do, it gets jittery. We’re not saying it’s the bottom line … but it’s nice to see the market react appropriately to solid macro data.”

For now, though, stocks could be heading higher. “I would say it’s not been a really crazy volume week, so it’s good, it’s fun, and it’s nice to go into the long weekend and start the summer with some strength, but the breadth and depth haven’t come yet,” Charloff said. “I want to say ‘Okay guys, we’re not dancing. We’re not’… We think we’ve had the worst of it, but not all.”

Find a catalyst

Any developments over the weekend can be important, but the weekend is also a time for investors to reflect. “If you’re having a really bad week and people can’t touch their money for 48 or 72 hours, you’re really off to a bad start,” Charloff said.

Bond yields have been lower and more stable over the past week. On Friday, the yield on the 10-year Treasury note was around 2.74%.

“I think it’s positive for stocks and bonds,” Charloff said. “After seven or eight weeks of outflows, you start to have money flowing into all types of fixed income instruments, and that puts a cap on yields.”

It’s also a boon for growth companies that have been hit hardest by rising interest rates.

The market closed on Tuesday in May. The Dow and S&P 500 were flat for the month through Friday, but were negative for the Nasdaq.

Stovall said June is usually a good month for the S&P 500. “June is usually very sluggish. In terms of performance, it’s kind of middling,” he said.

A week ahead of the calendar

on Monday

Memorial Day Holiday

market closed

Tuesday

income: Salesforce.com, life valueAmbarella, Victoria’s Secret, charging point

9:00 AM S&P/Case-Shiller Rates

9:00 AM FHFA Rates

9:45 AM Chicago PMI

10:00 AM Consumer Confidence

Wednesday

income: chewy, Hewlett Packard EnterpriseMichael Kors, Capri Holdings, PVH, pure storage

monthly car sales

9:45 AM Manufacturing PMI

10:00 AM ISM Manufacturing

10:00 AM Construction Expenditure

10:00 am bump

2:00 PM Beige Book

Thursday

income: Broadcom, Chener, Hormel Foodsasana, mass strikepager, Cooper CompanyOcta

8:15AM ADP Payroll Data

8:30 AM Unemployment Claims

8:30 a.m. Productivity and Costs

10:00 AM Factory order

Friday

8:30 AM Employment

9:45 a.m. Services PMI

10:00 AM ISM Service