April opened to a rally, and according to strategists the momentum could continue as the month progressed.
According to the jobs report this Friday by the U.S. Labor Department which had come in as surprisingly strong Friday there were 916,000 job additions in March, as against the 675,000 projected by economists.
Strong Jobs Report Expected To Power Stocks Next Week
According to commentators, the week ahead was expected to be rather quiet. A few economic reports and Federal Reserve speakers would fill the calm ahead of the earnings season.
The service sector survey by the Institute for Supply Management was set for release next Monday and would likely be closely followed after the manufacturing survey of the institute showed the highest rise since 1983. Wednesday afternoon would see the release of the minutes of the last Federal Reserve meeting.
CNBC quoted Stephen Stanley, chief economist at Amherst Pierpont as saying just about everything or almost everything, would likely be very robust into the foreseeable future. He added the economy was coming off a low base.
According to commentators, economists expected a very strong second quarter with the opening of the economy as also stimulus spending kicking in. They said the outlook would be positive for stocks unless interest rates rose too quickly.
Meanwhile, major stock indices came in steeply higher with the start of April.
The S&P 500 jumped 1.2% on Thursday to set a new record close at 4,019.87. Meanwhile, the Dow Jones Industrial Average vaulted over 170 points, while the tech-heavy Nasdaq Composite surged 1.8%.
Meanwhile, the closely followed benchmark 10-year Treasury stood higher at 1.68% Friday morning, well below 1.77% its recent high of earlier this week.
According to commentators, the 10-year was important as it influenced loans and mortgages, but it had also recently been seen to have a negative correlation with tech stocks. When the 10-year yield inched higher, tech went lower.
According to Shawn Snyder, head of investment strategy at Citi U.S. Wealth Management, the macro calendar was quite light. He added he thought attention would turn to earnings fast. He added that would be the next thing to turn to.
He added the market was often weaker just at the opening of earnings season.
Earnings in the first quarter were expected to be up 24.2% year-over-year, according to Refinitiv. It would be the first quarter in which the prior year results included pandemic shutdown impact.
Some strategists expected the earnings season to be open with more favorable comments from companies which may be expected to lead to positive forecast revisions, providing fuel for the stock market.
Jonathan Golub, chief U.S. equity strategist at Credit Suisse noted that around 13 months ago COVID-19 sent people home from their offices and kids from their school. He added, while the pandemic caused a near shut down of the global economy, the economy was kept afloat thanks to an unprecedented policy response, which led to the shortest recessionary decline as also the steepest bounce in stock market history.
According to Golub the S&P 500’s 78% rise from the bottom last March was largely due to earnings.
He wrote in a note that in each of the two recovery periods of the past, the trend of positive revisions had extended over 2-3 years, which acted as an important tailwind for the market.
He added that economists had continued with higher growth forecast revisions.
He said that their work showed that every 1% GDP change drove a 2½–3% change in revenues, and even larger profits improvements.
The expected earnings bounce apart, some strategists had been expecting April to be a bullish month for stocks, as it had been historically.