The major market equity indices ended last week higher, aided by the May jobs report Friday that missed consensus expectations but showed considerable progress compared to the disappointing April report. Many have referred to this one as a "Goldilocks" report, meaning the month-over-month improvement was meaningful but still warrants some stimulative efforts by the Fed and the federal government.
The jobs numbers helped soothe the market following a bevy of economic data, including reports for the ISM Manufacturing and Non-Manufacturing May indices that confirmed the reopening continued during the month but input costs remain elevated while companies continue to experience supply chain issues and difficulty in attracting employees.
May job creation was likely hampered by the American Rescue Plan of 2021 that includes an extra $300 a week in jobless aid and extended pandemic unemployment assistance for the self-employed. We have heard a growing number of companies of all sizes discussing the inability to find workers leading to production and productivity challenges.
With two dozen states ending participation in the federal unemployment benefits program in the coming weeks, and a reported four dropping out this past week, we expect we'll see incrementally better job gains in the coming months, which could help alleviate some of the reported supply chain shortages.
Current consensus EPS expectations for the S&P 500 have been moving up as vaccinations and pandemic restrictions eased but they likely don't reflect continued supply chain issues nor the degree to which prices have moved higher. While we expect some improvement in the coming months, if those factors persist longer than expected or strengthen further more than expected, we could see the S&P 500 forecast being revised lower.
So, what's on tap for the coming week and what does that offer to reveal about the economy and markets going forward?
The Stock Market Next Week
Following the sea of economic data during a shortened trading week, the week ahead brings a far smaller number of such reports. However, among them will be one that many, ourselves included, will be watching closely: the May Consumer Price Index.
The Prices component in both the May ISM Manufacturing and Non-Manufacturing indices remained at elevated levels and we'll be picking through the May CPI report to determine how much is being passed on to consumers as well as how sticky those increases are likely to be.
Meanwhile, Monday brings an event that many look forward to around this time each year -- the keynote presentation at Apple's (AAPL) annual WWDC or Worldwide Developers Conference. We suspect the event will largely be geared toward software updates later in the year across Apple's various devices, but we can't rule out any surprises, including a potential business update.
The other event we'll be paying close attention to is the next monetary policy meeting by the European Central Bank on Thursday, June 10. Recent data have shown the region heating up, but similar to what we are seeing here in the U.S., input prices and supply chain issues are also being noted. With the Fed's next policy meeting slotted for June 15-16, we'll be looking at the ECB's wording and thoughts on what it would take to reign in its stimulative efforts.
Here's a closer look at the economic data coming at us next week:
Monday, June 7: April Consumer Credit.
Tuesday, June 8: April Trade Balances.
Wednesday, June 9: Weekly MBA Mortgage Applications Index; April Wholesale Inventories; Weekly EIA Crude Oil Inventories.
Thursday, June 10: Weekly and Continuing Jobless Claims; May Consumer Price Index; EIA Natural Gas Inventory report; May Treasury Budget.
Friday, June 11: June University of Michigan Consumer Sentiment Index -- Preliminary.
Investor Conferences Heat Up
While the volume of quarterly earnings reports continues to shrink this week, the number of investor conference climbs to more than 30 such events that will feature management presentations. In both the earnings reports as well as in those numerous presentations, we'll overturn earnings-related "rocks" for clues as to what we're likely to hear on supply chains, input costs and other items when the June-quarter earnings season kicks into gear not too long after the July 4th holiday.
Here are the earnings reports we'll be focusing on next week:
Monday, June 7: Marvell Technology (MRVL) .
This commentary is an excerpt from the Trifecta Stocks Roundup, a weekly feature sent to subscribers of Trifecta Stocks. Click here to learn more about this portfolio, trading ideas and market commentary product.
-- Bob Lang and Chris Versace are co-portfolio managers of Trifecta Stocks.
(Apple and Marvell Technology are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)