JOBS WEEK IS HERE: Here's your full preview of a big week for the US economy
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An American fan enjoys the atmosphere ahead of the 2010 FIFA World Cup South Africa Group C match between England and USA at the Royal Bafokeng Stadium on June 12, 2010 in Rustenburg, South Africa.
Friday's 0.5% decline in the S&P 500 wasn't enough to drop it into negative territory for April. The benchmark average finished the month up 0.3% at 2065.30 as it recorded its third straight monthly gain. Despite its three-month winning streak, the S&P 500 has gone nowhere since the start of 2015.
The upcoming week will be a busy one. A steady stream of economic data is highlighted by Friday's release of the April jobs report.
"In fact, we expect the coming payroll report to remain consistent with this theme of continued domestic resilience," says Tom Porcelli of RBC Markets. "The lack of stresses in the employment backdrop (stemming from the firing side) and the fact that job openings remain quite elevated suggests a very good pipeline for job growth near-term."
The data-heavy week will give us an updated look at the health of the US economy, and could be an indication as to whether the next Fed rate could come in June, as many economists are expecting.
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Earnings reports were the big story of the week. Things got started off on the wrong foot on Tuesday as Apple, the largest company by market cap in the US, reported its first year-over-year revenue decline since 2003. The tech giant said iPhone sales tumbled 16% to 51.2 million, and gave a downbeat revenue guidance of $41 billion to $43 billion versus expectations of $47.35 billion. "The smartphone market, as you know, is currently not growing," CEO Tim Cook said. "However, my view of that is it's an overhang of the macroeconomic environment in many places in the world, and we're very optimistic that this too shall pass."
The bad news on the earnings front was compounded on Tuesday as Twitter reported revenue climbed 36% to $595 million, but that was below the $607.8 million that analysts were anticipating. Additionally, the company's revenue guidance of $590 million to $610 million was well shy of the $677.6 million that was expected.
However, things took a turn for the better on Wednesday as social media giant Facebook crushed estimates. The company earned $0.77 per share on revenue of $5.38 billion. Both numbers were well ahead of analyst expectations. Monthly active users came in at 1.65 billion and monthly mobile active users totaled 1.51 billion. Facebook announced it would be offering a new C class of shares that wouldn't have voting rights.
The good news kept coming on Thursday as Amazon announced Q1 net profit of $513 million, its largest in history. The online marketplace earned $1.07 a share as revenue jumped 27% YoY to $29.1 billion. Both numbers were well ahead of expectations. -
The US economy grew at its weakest pace in more than two years. The advance estimate of Q1 GDP showed the US economy grew at an annualized pace of 0.5%, missing analyst expectations of 0.7% growth. Lower oil prices weighed on energy and mining activity, and a buildup in inventories took away from growth.
"The negatives of this drop in oil prices in terms of corporate earnings and capital investing is very much an upfront hit," Steve Wood, chief market strategist for North America at Russell Investments, told Business Insider. "But the benefits from spending, disposable income — it takes a longer time to roll out and to feel those benefits."
The bright spot in the report was personal consumption, which makes up over two-thirds of output. It rose by 1.9% in the quarter, versus expectations of a slowdown to 1.7%. -
The Fed and the Bank of Japan kept policy on hold. As expected, the Federal Open Market Committee held its fed funds rate at a range of 0.25% to 0.50% at Wednesday's meeting. The accompanying statement saw the Committee remove its language indicating global markets pose a risk to the US economy. That caused some economists to ratchet up their expectations the Fed will raise rates at its June meeting. However, as of end of day Friday, the market sees just a 12.0% chance of that happening. Currently, December is the first month with a better than 50% chance for a rate hike. It has a 57.9% probability.
While it was highly anticipated the Fed would remain on hold, most economists were shocked that the Bank of Japan decided to stand pat instead of introducing more easing. In an 8-to-1 vote, the BOJ held its asset-purchase program at an annual rate of about 80 trillion yen. Additionally, the BOJ kept its benchmark interest rate at -0.10% and cut both its growth and inflation forecasts for the next couple of years. The bank now expects CPI to hit its 2% target at some point during fiscal-year 2017. Previously it had forecast the 2% target would be reached during the first half of the fiscal year.