April Is Looking Like It Will Be Even More Turbulent Than March For The Stock Market

Based on what we’re seeing, it’s looking a like April may not come in like a lion and go out like a lamb.

Turning our Gaze to the Week Ahead

It will be a short one given the Easter holiday that sees domestic markets closed for Good Friday. Nevertheless, there will be more economic data to be chewed through and some earnings reports as well before we get to all that weekend candy.

Among the reports we’ll be watching will be the February JOLTS report a well as the March Retail Sales report. Given continued warning signs from retailers, we are not expecting major upside surprises from the March Retail Sales Report, which is already facing tough year over year comparisons given a far later than usual Easter holiday this year.

This week also has the usual inflation indicators for March, the Consumer Price Index as well as the Producer Price Index, as well as the NFIB Small Business Optimism Index and Consumer Sentiment indices. Given the signs of higher input costs we’ve been seeing these last few months, we’ll continue to keep tabs on the figures. That said, we also recognize the year over year percentage increases are due in part to sharp drops in commodity prices last year and in the coming weeks, we are likely to see the pace of rising input costs ameliorate. This is something Lenore and Chris talk about on last week’s podcast, and Lenore also published a piece on this last week.

The week is also a little light on Fed speakers with just Minneapolis Federal Reserve Bank Need Kaskkari speaking on Tuesday. Given the data we’ve been getting over the last several weeks and then Friday’s March Employment Report, we would have liked to have heard the view from more than just one Fed head next week to decipher when the Fed may next boost interest rates. While one month does not make a trend, given the vector and velocity of 1Q 2017 another month of weaker than expected economic data could push the talk around the Fed’s next interest rate hike into the second half of 2017.

Given yet another negative revision in the Atlanta Fed’s GDPNow forecast for 1Q 2017 to just 0.6 percent following today’s Employment Report, we continue to think it will be a volatile earnings season over the coming weeks. For context, GDP in 4Q 2016 was recently revised up to 2.1 percent and the expectation for President Trump’s fiscal stimulus initiatives continue to get pushed out rather than pulled in. We expect companies to reflect all of this in their comments and expectations over the coming weeks.

Call this week the final calm before the earning storm, because there are only a handful of companies reporting earnings during the shortened week, including Asset-lite Business Model company Infosys (INFY) and Economic Acceleration/Deceleration contender Fastenal (FAST) as well as Taiwan Semiconductor (TSM). Of the three we’ll be tuning into Taiwan Semiconductor to get a better handle of the ramp of both new NAND flash and organic light emitting diode demand as well as expectations for PCs and smartphones that will likely impact Apple (AAPL) as well as Qualcomm (QCOM). For those invested in Applied Materials (AMAT) and LAM Research (LRCX) and other semiconductor capital equipment companies, Taiwan Semi’s comments on its 2017 capital spending plans will be a must watch.

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Moon Kil Woong 4 years ago Contributor's comment

It does look more turbulent, however, March was not that turbulent.