The recent weakening of the labour market data has contributed to market volatility. However, the robust March jobs report, which reflected a growing economy and moderate inflation, provided some relief. Nevertheless, traders should brace themselves for the upcoming 1Q earnings reports and inflation data to test the stock market's stability.

According to the Labour Department's report, nonfarm payrolls grew by 236,000 jobs in March, and the unemployment rate fell to 3.5%. These factors indicate continued economic growth and another quarter-point rate hike in May is probable. With these developments, traders should expect another rate hike soon, and the odds of a Fed pause are low.

Traders expect significant economic data releases, including the CPI and PPI data, on Wednesday and Thursday, respectively. These key indicators will help determine the Fed's future rate-hiking path. Additionally, major banks like JPMorgan Chase, Wells Fargo, and Citigroup will report their Q1 financial results on Friday, influencing the market.

Despite the positive economic outlook, traders should keep a close eye on these developments as they indicate future market trends. Falling profits pose a significant risk of making stocks appear more expensive relative to companies' future profits, given the current trend of companies in the S&P 500 trading at approximately 18 times their projected earnings over the next 12 months.

It is crucial to be cautious and keep an eye on how these factors will impact corporate earnings moving forward. The overall economic outlook remains positive, but underlying challenges could affect the market's future performance. Traders must remain vigilant and consider all the risks and challenges facing the market, including ongoing geopolitical tensions, corporate earnings, and the Fed rate-hiking campaign.

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Fullerton Markets Research Team
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