What to expect on new streak, jobs report from May 30 - June 6


Last week, a bounce in U.S. stocks lifted the S&P 500 and the Nasdaq, while the Dow managed its first gain in eight weeks.

The week ended with the S&P 500 ending its longest losing streak in over a decade. All three major indexes posted gains of at least 5%, as investors were encouraged by a slew of positive economic data and better-than-expected earnings reports.

The last time the S&P 500 lost a streak of over 10 weeks was in 1970, 1980, and 2001. According to data from LPL Financial, the index rose 33% during the next 12 months.

Ryan Detrick, LPL's chief market analyst, noted that the performance of the S&P 500 after the tea decline in 2001 was rough sledding. Over the next six months, the index lost 14%.

Wall Street to be off on Memorial Day holiday

After a holiday-shortened week, investors are expected to focus on crucial employment data released in the last week of May.

The closely-watched jobs report from the Labor Department is expected to show that the US economy lost jobs in May. Economists predict that the economy added around 325,000 jobs last month, down from a robust 428,000 in April.

Due to the increasing number of companies reporting higher-than-expected profit margins, investors have become more concerned about the possibility of layoffs and a slowdown in hiring.

Aside from the jobs report, investors will also be monitoring the weekly jobless claims and the number of job openings in the country.

A key economic indicator released on Tuesday will be the consumer confidence index. This is considered an essential gauge of the country's financial health.

Investors to ease impacts on company's margins

After a couple of positive quarterly reports from major retailers, investors were able to temporarily ease their concerns about the impact of higher prices on the company's profit margins.

The increasing number of companies reporting higher-than-expected profit margins raised concerns about consumers' vulnerability. According to Brad McMillan, a financial network analyst, the rising prices and declining real incomes could impact the country's economy.

Suppose the company's second-quarter earnings reports continue to show strong growth. In that case, the country's macroeconomic pressures could start to show up more significantly.

According to data from FactSet, the term inflation was mentioned at least once during the 398 earnings calls that S&P 500 companies held from March 15 to May 24. A total of 338 companies said the supply chain during the same period.

Despite the positive earnings reports, the S&P 500's growth rate for the first quarter of 2019 was 9%, the lowest since early 2020. As a result, 68 companies out of the S&P 500 issued negative earnings guidance for the first quarter of 2019.

According to Christopher Rupkey, a chief economist at FWDBONDS, it's too early to rule out another layoff as its economy is entering a recession. He noted that high-flying tech companies might be forced to reduce their workforces due to the falling share prices.

Although the earnings season is over, more reports are expected to be released during the next couple of weeks. Some of these include those from Amazon, Google, and Salesforce.com.

According to Eddie Ghabour, a co-founder of Key Advisors Group, the recent market rally is nothing more than a bear bounce. He said that investors are still not optimistic about the stock market despite the positive earnings reports.

Ghabour also added that the steep selling in the stock market over the past couple of weeks was caused by the first-quarter earnings data. He said that the current quarter could also be worse than the previous one.