US stocks traded mostly higher on Monday as investors reevaluated the impact of Friday’s strong jobs report on the timing of a Fed interest rate hike.
“There’s no economic news so markets are going to reassess Friday’s employment data,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “Friday’s (selloff) was over-exaggerated. The market is catching its breath here,” CNBC reported.
Investors now see a June rate rise as more likely after February’s nonfarm jobs report showed a gain of 295,000, above expectations of 240,000 in February, down from 257,000 in January.
The unemployment rate fell to 5.5 percent, while hourly wages ticked up 0.1 percent, below consensus and off the surprise 0.5 percent gain in January.
“I certainly think (the market) is very worried about the Fed, (which) created this financial market dream world environment,” said Jack Ablin, chief investment officer at BMO Private Bank. “As I thought about it over the weekend, ultimately the economy should prevail.”
“I’d rather have strong economic news and the Fed’s going to tighten than weak economic data and the Fed has no ammunition,” Ablin said.
Other Factors
Other analysts highlighted other factors affecting the market besides the economy and the Fed.
“We think the market has not fully reflected the slowdown that’s going to happen in 2015,” said Nick Raich, CEO of The Earnings Scout. “Investors are paying more today for less growth.”
He pointed out that stocks are now trading at 17.5 times earnings versus 15.5 times earnings in 2014. In addition, last year at this time analysts had expected growth of 9.5 percent in the second quarter of 2014, while today “we’re looking at basically flat,” Raich said.
Apple is in focus Monday as it holds its first major event of the year, where it is set to formally unveil the price and final features of its watch at a meeting in San Francisco, which kicks off at 1 p.m. ET.
Earnings due after the bell Monday include Urban Outfitters, Casey’s General, United Natural Foods. No major economic reports are expected Monday.
The JOLTS report is due Tuesday along with wholesale trade data followed by the monthly Federal budget statement on Wednesday. Arguably the most noteworthy release will be February retail sales figures on Thursday.
“This is a week we think about the consumer,” said Art Hogan, chief market strategist at Wunderlich Securities. He added that of the early morning corporate news on Monday, most of it was priced in and General Motors’ buyback announcement was the most significant.
General Motors will buy back $5 billion in stock, and commit to returning any cash above $20 billion in the future to shareholders. McDonald’s reported comparable-store sales that fell globally and in the United States, sharply missing expectations of a mild decline. Alcoa is buying metals producer RTI International Metals in a $1.5 billion stock transaction.
