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Top 5 Things To Watch In The Stock Market This Week

U.S. Stock Futures Flat Ahead Of Big Earnings Week

U.S. stock futures are relatively flat on Monday morning as investors brace for one of the busiest weeks of the first-quarter earnings season. Investors are due for a busy week ahead between the Federal Open Market Committee meeting, preliminary U.S. Q1 GDP report, and ongoing corporate earnings report. Tesla (NASDAQ: TSLA) will be among the big names leading the pack this week. The electric vehicle giant is reporting earnings after the closing bell Monday.

Last week, the stock market came under pressure after some reports said that Joe Biden will seek to increase the capital gains tax on wealthy Americans. Yet the news raises questions for all investors. Should they rush to liquidate their big winners to avoid a larger tax bite if they wait? Before we go deep, ask yourself, what’s the likelihood of this becoming law? And even if it does become law, there is a decent chance things will change under future administrations.

With strong economic data backing the recovery of the U.S. economy, Wall Street could kick off the second quarter with a strong rally. Sure, the report from Netflix (NASDAQ: NFLX) may be less than stellar. That serves as a reminder that growth stocks would eventually report slower growth rates once the pandemic tailwinds subside. Could this be why stock futures are relatively flat in anticipation of a big earnings week? After all, investors may be struggling to find a direction. As of 6:56 a.m. ET, Dow futures are trading in positive territory, rising 0.04%. Meanwhile, the S&P 500 and Nasdaq futures are trading in negative territory, falling 0.09% and 0.29% respectively. 

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Federal Open Market Committee Meeting

Market watchers are expecting a monetary policy decision and press conference from the Federal Reserve on Wednesday. The Fed is not expected to change interest rates at the conclusion of its two-day FOMC meeting. It is likely to maintain the rates between 0-0.25%. 

Judging from past press conferences and public remarks, Fed officials have signaled that the quantitative easing policies remain to stay in the near term. This came amid the backdrop of better economic recovery data, building a case for easing support. From improvement in initial jobless claims to stronger rebound in retail sales, these data suggest that inflation risk could be imminent. However, many are expecting Powell to defend the central bank’s policy of letting inflation rise above its 2% target. After all, he believes that the recent pick-up in prices is seen as temporary.

At the conclusion of the April FOMC meeting, we expect Chair Powell and the FOMC to give a more positive view of the economy but reiterate that the economy needs to make further progress before signaling any policy change and risks remain from the virus,” Bank of America chief economist Michelle Meyer.

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U.S. Q1 GDP

Another market-moving event to watch this week is the preliminary reading of first-quarter U.S. gross domestic product (GDP). Observers will be watching for fresh clues on the strength of the economy. If recent data is of any guide, investors could expect a bump in those numbers.

The data is expected to show the economy expanded at an annual rate of 6.5% in the January-March period. That would be an acceleration from the growth of 4.3% in the previous quarter. Irrespective of what the number may be, we could safely say that the U.S. economy started 2021 on a very much stronger footing than many would have expected.

Some analysts also believe that the growth isn’t at its peak yet, and the economy is still accelerating. Such forecasts take into account the fiscal stimulus and the net income effect of people returning to their jobs. There is a view that growth is likely to peak in the middle two quarters of the year before gradually slowing down. Investors should note that the U.S. economy is still digesting the $2.8 trillion stimuli agreed in the first quarter period.

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Big Tech Earnings

Bank stocks brought about a good start to the first-quarter earnings season. And now, here comes the earnings week where most investors will be waiting anxiously. After all, this will be the busiest week of the first-quarter earnings on Wall Street. Most of the focus will be on the five big-name mega-cap tech companies. The companies are, of course, Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOGL). There is no question about their growing dominance in the tech space. Could these five tech stocks enjoy another quarter of blockbuster earnings and sales growth? 

Amazon is our favorite FANG name into 1Q earnings. We expect upside to our 1Q revenue estimate of $105B on continued strong e-commerce trends (also helped by two rounds of stimulus), with investor expectations for $106B+ based on our conversations,” JPMorgan Chase analyst Doug Anmuth.

Apart from the big tech stocks, some of the big names reporting this week are Advanced Micro Devices (NASDAQ: AMD), Qualcomm (NASDAQ: QCOM), Shopify (NYSE: SHOP), Twitter (NYSE: TWTR), Pinterest (NYSE: PINS) and eBay (NASDAQ: EBAY). Expectations are certainly high for these tech companies considering that many have largely benefited from stay-at-home trends during the pandemic. It’s worth pointing out that their year-over-year growth rates or outlook will require scrutiny. That is considering stay-at-home trends which contributed to strong results last year begin to ease.

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Industrial Earnings

Investors looking to shift from hyper-growth stocks to reopening plays such as the industrials should put these industrial stocks on their radar too. Among a diverse group of blue chips, many are paying close attention to Boeing (NYSE: BA), Caterpillar (NYSE: CAT), General Electric (NYSE: GM), and United Parcel Service (NYSE: UPS). There is also a list of names from the consumer and pharmaceutical industries reporting earnings this week. 

Notable names from the oil & gas sector reporting this week are ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX). Both will be releasing their latest earnings on Friday to wrap up the week. So, whether it is the U.S. Q1 GDP numbers, monetary policy decisions by the Fed, or a barrack of earnings, these will be enough to keep you busy as the week gets underway.

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