The stock market keeps reaching new record highs.
The S&P 500 (^GSPC) and Nasdaq (^IXIC) both ended last week at their highest levels ever. According to a study by Deutsche Bank, the S&P 500 has now risen in 16 of the last 18 weeks for the first time since 1971.
This week, Federal Reserve Chairman Jerome Powell's testimony on Capitol Hill and February's jobs report will test the stock market's stormy rally. There is also up-to-date information on economic activity in the service sector and job vacancies the schedule.
After most of the S&P 500 reported earnings, Target (TGT), Costco (COST) and Kroger (KR) are three of the biggest consumer-focused brands reporting corporate results next week.
Fed food
Federal Reserve Chairman Jerome Powell will deliver his semi-annual monetary policy testimony to the House of Representatives and Senate starting Wednesday. Investors will be paying close attention to Powell's update on the overall state of the U.S. economy, the fight against inflation and when the central bank may begin cutting interest rates.
Earlier in the week, Bloomberg data showed that markets expect the Fed to cut interest rates three times this year starting in June as the decline in inflation has slowed. This is consistent with recent comments from Chairman Powell and current forecasts from the Fed itself. The Federal Open Market Committee will announce its latest policy decision and a summary of economic forecasts on March 20.
Read more: What the Fed's rate decision means for bank accounts, CDs, loans and credit cards
Federal Reserve Chairman Jerome Powell at a press conference after the January FOMC meeting. (JULIA NIKHINSON/AFP via Getty Images) (JULIA NIKHINSON via Getty Images)
The state of the labor market
After the inflation story stalled recently as the Fed's preferred indicator posted its biggest monthly increase in a year, Wall Street now expects the central bank to be patient in cutting interest rates. Economists say a key to ensuring this policy decision goes smoothly and the economy avoids recession is for the labor market to remain resilient.
The story goes on
New jobs data scheduled for this week includes updates on wages and job vacancies. The headliner will be the February jobs report, which will be released Friday morning at 8:30 a.m. ET.
The report is expected to show that unemployment added 190,000 non-farm jobs to the U.S. economy last month rate According to Bloomberg data, the rate remains unchanged at 3.7%. In January, the US economy shocked Wall Street with 353,000 new jobs, while the unemployment rate remained stable at 3.7% for the third month in a row.
Results update
Earnings season is almost over.
With 97% of the S&P 500 reporting fourth-quarter earnings, the S&P 500 is expected to post 4% earnings growth in the fourth quarter compared to the same period last year, according to new FactSet data. This is the second consecutive quarter of earnings growth for the benchmark index.
And in particular, the prospects for profit growth in the current quarter are not deteriorating at the usual pace.
John Butters, senior earnings analyst at FactSet, noted that analysts typically reduce their earnings estimates in the first two months of a quarter. Over the past 20 years, earnings have typically been revised downwards by an average of 2.9%. For the current quarter, these earnings estimates were revised down by just 2.2%.
History shows that stocks have more room to run
One of the key predictions for Wall Street in 2024 was a choppy first month of trading before a rally late in the year. Many expected uncertainty over the Federal Reserve's rate-cutting path and election fears to hold investors tight.
That didn't happen. Both the S&P 500 and Nasdaq Composite had their best February since 2015, amid several underwhelming earnings reports from Big Tech companies. This improving earnings outlook has led several Wall Street strategists to raise their year-end targets for the S&P 500.
History shows that a further rise in stocks is the most likely outcome. Research from Ryan Detrick of the Carson Group shows that since 1950, the S&P 500 has started the year positive 28 times in January and February. The benchmark average was positive in 26 of these cases over the next 12 months. When the first two months were positive, the S&P 500 returned an average of 19.9% for the year.
While Detrick noted that this is not an accurate forecast for a return of nearly 20% this year, if the S&P 500 actually rose by the average amount, it would end 2024 at 5,719 points.
Weekly calendar
Monday
Business news: No significant economic publications.
Merits: Gitlab (GTLB), Stitch Fix (SFIX), ThredUp (TDUP)
Tuesday:
Economic data: S&P Global US Services PMI, February, final (51.4 expected, 51.3 previous); S&P Global Composite US Composite PMI, February final (51.4 previous); ISM Services Index, February (52.9 expected, 53.4 previous); Durable goods orders, January final (-6.1% previous)
Merits: Box (BOX), ChargePoint Holdings (CHPT), Crowdstrike (CRWD), Nio (NIO), Nordstrom (JWN), Ross Stores (ROST), Target (TGT), Vivid Seats (SEAT)
Wednesday
Economic data: Federal Reserve Chairman Jerome Powell begins his semi-annual testimony on Capital Hill. MBA mortgage applications, week ending March 1 (-5.6%); ADP Personal Payrolls, February (+145,000 Expected, +107,000 Previous); Fed Reserve Beige Book January
Merits: Abercrombie & Fitch (ANF), Campbell's (CPB), Foot Locker (FL), JD.Com (JD), Victoria's Secret (VSCO)
Thursday
Economic data: Challenger job cuts year-over-year, February (-20% prior); Unit labor costs, fourth quarter (+0.7% expected, +0.5% previous); Non-farm productivity, fourth quarter (+3.1% expected, +3.2% previous); Initial jobless claims, week ending March 2 (215,000 previously)
Merits: American Eagle Outfitters (AEO), Big Lots (BIG), BJ's (BJ), Broadcom (AVGO), Burlington Stores (BURL), Costco (COST), DocuSign (DOCU), Gap (GPS), Kroger (KR), Marvell Technology (MRVL), MongoDB (MDB)
Friday
Economic calendar: Non-Farm Employment Numbers, February (+190,000 Expected, +353,000 Previous); Unemployment rate, February (3.7% expected, previously 3.7%); Average hourly earnings, month over month, February (+0.2% expected, +0.6% previous); Average hourly wage year-on-year, February (+4.3% expected, +4.5% previous); Average weekly hours worked, February (34.3 expected, 34.1 previous); Labor force participation rate, February (previously 62.5%)
Merits: No notable earnings releases.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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