U.S. equity markets lost ground this week, with the S&P 500 notching its fourth consecutive weekly loss on disappointing earnings reports, particularly from tech giants such as Apple and Amazon. For the week, the Dow fell 2.5%, the S&P 500 shed 3.3%, while the Nasdaq declined 3.9%. The three major indices declined in April, with monthly losses of 4.9% for the Dow, 8.8% for the S&P 500, and 13.3% for the Nasdaq. It was the worst month for the tech-heavy Nasdaq since 2008. The 10-Year U.S. Treasury note yield ended the week nearly unchanged at 2.94%, as yields fell early in the week, briefly touching a low of 2.72% on Tuesday before rising later in the week. The price of WTI crude fell 0.8% on Friday but rose 2.7% for the week at just over $104 a barrel, as energy tensions rose between Russia and the European Union.
Markets were also affected by the prospect of more aggressive tightening by the Federal Reserve to rein in surging inflation, with a hike of 50 basis points expected during the Fed’s upcoming policy meeting next week. Next week, we also can expect earnings releases from Lowe’s, Pfizer, AMD, S&P Global, Airbnb, Starbucks, AIG, Prudential, Moderna, Royal Dutch Shell, and Uber, among others. Key updates on the U.S. labor market will include the March JOLTS on Tuesday and April ADP National Employment Report on Wednesday. This will set the stage for the Labor Department’s nonfarm payrolls report for the month of April on Friday.
Key Takeaways
- Earnings season continues, with earnings from Lowe’s, Pfizer, AMD, S&P Global, Airbnb, Starbucks, AIG, Prudential, Moderna, Royal Dutch Shell, and Uber, among others.
- The Federal Reserve will convene at its upcoming FOMC meeting on Tuesday and Wednesday, and is expected to raise the Federal Funds Rate by 50 basis points to a range of 0.75-1.00%.
- Several key labor market updates are expected this week, including the Labor Department’s official Nonfarm Payrolls report for the month of April.
Events Calendar:
Monday, May 2
- Moody’s (MCO), Expedia (EXPE), Diamondback Energy (FANG), Lowe’s (L), and Avis (CAR) report earnings
- U.S. ISM Manufacturing PMI (April)
- U.S. Construction Spending (March)
Tuesday, May 3
- Day 1 of May 2022 FOMC Meeting
- Pfizer (PFE), Estee Lauder (EL), Advanced Micro Devices (AMD), S&P Global (SPGI), BP (BP), Airbnb (ABNB), Starbucks (SBUX), AIG (AIG), Thomson Reuters (TRI), Hilton (HLT), and Prudential (PRU) report earnings
- Job Openings and Labor Turnover Survey (JOLTS) (March)
- U.S. Durable Goods Orders (March)
- Eurozone Unemployment Rate (April)
Wednesday, May 4
- Day 2 of May 2022 FOMC Meeting; rate decision expected
- Novo Nordisk (NVO), CVS (CVS), Booking Holdings (BKNG), Regeneron (REGN), Uber (UBER), Marriott (MAR), Moderna (MRNA), MetLife (MET), Exelon (EXC), Cognizant (CTSH), Allstate (ALL), Yum! Brands (YUM), and eBay (EBAY) report earnings
- ADP Nonfarm Payrolls Report (April)
- U.S. ISM Services PMI (April)
Thursday, May 5
- Royal Dutch Shell (SHEL), ConocoPhillips (COP), Anheuser-Busch (BUD), Becton Dickinson (BDX), Dominion Energy (D), Intercontinental Exchange (ICE), and ING Group (ING) report earnings
Friday, April 6
- Cigna (CI) reports earnings
- U.S. Nonfarm Payrolls (April)
- Canada Employment Report (April)
- Germany Industrial Production (March)
May 2022 FOMC Meeting
The Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday for its widely-anticipated May policy meeting. The Federal Reserve is expected to raise its benchmark Federal Funds rate by 50 basis points (bps), to a range of 75-100 bps, following a 25-bp increase during its previous meeting in March. Markets are now pricing in a 99.1% chance of a 50-bps increase at the Fed’s policy meeting next week, according to CME Group’s FedWatch Tool. The Federal Funds Rate is now expected to end the year in a range of 200-225 bps, 50 bps higher than previously anticipated. In addition, the Fed is expected to begin winding down its record $9 trillion balance sheet as early as next month, at a rate considerably faster than the previous tightening cycle in 2017-2019.
Labor Market Updates
This week, several important updates are expected on the U.S. labor market. On Tuesday, the Bureau of Labor Statistics (BLS) is set to release its monthly Job Openings and Labor Turnover survey (JOLTS), showing the total number of hires, quits, separations, and job openings for the month of March. Payroll provider ADP will release its National Employment Report for April on Wednesday, tracking private sector job growth. The most important update is set to arrive on Friday, as the BLS will release its April nonfarm payrolls report. Consensus estimates call for a gain of 395,000 positions, following a gain of 431,000 in March. Hiring in April is expected to remain strong, despite preliminary data showing U.S. GDP contracted 1.4% during the first quarter of 2022, as reported by the Bureau of Economic Analysis (BEA). The U.S. labor market remains historically tight, with unemployment currently at 3.6% and job openings at a record 11.3 million.
