Stocks Rise Monday Ahead of Federal Reserve April Meeting, Jobs Day

Stocks ended higher after a late rally pushed major indices into the green.

In crypto, Ethereum outpaced Bitcoin, as both posted gains.

The morning started off hectic after a "flash crash" hit European stocks. Despite trading being halted and indices falling as much as 8%, the losses were mostly pared as stocks finished down 2%. The incident is thought to have been caused by a “fat finger” trade, which is when human error leads to a trade being for the wrong security and/or amount.

Warren Buffet and Berkshire Hathaway announced over the weekend that they increased their stake in Activision Blizzard (ATVI) to 9.5%. Holdings were at roughly 1.87% at the beginning of the year. So what's the bet? Well, Buffet is betting that Microsoft will succeed in buying the company for $95 per share, while he's been able to buy it prices around $80 per share since the deal was announced.  Some people are betting that President Biden’s antitrust enforcers could unravel the deal, but in Buffet’s words, “If the deal goes through, we make some money and if the deal doesn’t go through, who knows what happens.”

Web 2.0 gaming wasn’t the only thing in the news this past weekend. The highly anticipated metaverse by Yuga Labs, creators of The Bored Apes Yacht Club, raised about $320 million selling 55,000 parcels of virtual land. While traders rushed to the metaverse with their ApeCoins, Ethereum "gas fees" skyrocketed to as much as 2.6 ETH in gas fees ($6,500)... as buyers paid upwards of $123 million in fees alone.

Anyways, back to reality. This is a busy week of economic events, via the Federal Open Market Committee’s rate decision and jobs day, as well as a busy week for earnings.

FOMC Rate Decision

The Fed’s May meeting is expected to conclude with the announcement of a half-point hike in interest rates. This follows last week’s PCE report, which showed the Fed’s preferred inflation gauge hit an annualized rate of 5.2% even with food and energy.

Investors are expecting the Fed to begin reducing its balance sheet, as well. The pace investors expect isn’t crystal clear like the expected 50 basis point hike in rates, so the market’s reaction to whatever gets announced will be interesting. Fed Governor Lael Brainard said she expects the quantitative tightening to be “considerably” more rapid than “in the previous recovery”.

Jobs Day

We end the week on Jobs Day via the Employment Situation Summary from  the Bureau of Labor Statistics for the month of April.

The last report showed a slowdown in hiring activity and an unemployment rate of 3.6%, which was a return to pre-pandemic levels.

Average hourly earnings are expected to rise 0.4% in April, matching March’s rise. This figure will likely be monitored closely this time around as rising wages can reinforce rising prices, in what is known as a wage-price spiral.

Travel-Tech Stock Earnings

Earnings will be in abundance this week and there will be a lot of narratives to follow as a broad list of companies enter the earnings queue.

One group that will be particularly interesting is the travel-related tech companies that report this week. These include; Airbnb (ABNB), TripAdvisor (TRIP), Uber (UBER), and Lyft (LYFT).

Travel-related tech companies hold an advantage going into the expected rush to get out and vacation this summer as their business is much broader than an airline or hotel’s business. TripAdvisor in particular can make money pretty much every step of the way, and it doesn’t make a difference to them if you fly, drive, or walk to your vacation destination.

Uber, Lyft, and Airbnb hold this advantage as well, but to a lesser extent, as their services are widely available virtually everywhere in the United States. While you may need to hail more rides when you fly to your destination compared to driving, that demand doesn’t fall to zero as it does for an airline. Further, Airbnb’s are everywhere while Caesars (CZR) - online gambling aside - needs you to go to Vegas and then go to their casino, and Hilton (HLT) - while more widely available - still is locked in fewer locations.

But while these stocks can benefit from any kind of travel, they remain quite a bit farther from highs than major airlines and they’ve certainly underperformed alongside other tech stocks.

We talked earlier this earnings season about how airlines have been able to successfully pass on price increases as demand has remained resilient. The industry’s bullish guidance should have a symbiotic relationship with the stocks above, so it will be interesting to see how these stocks follow up on a high bar set. Are they babies that got tossed with the bathwater or stocks that flew a little too close to the sun during the pandemic’s tech run-up?

Economic Events this Week

Tuesday

- 10:00 ET - Factory Orders

- 10:00 ET - JOLTs - Job Openings

Wednesday

- 08:15 ET - ADP Employment Change

- 08:30 ET - Trade Balance

- 10:00 ET - ISM Non-Manufacturing Index

- 10:30 ET - EIA Crude Oil Inventories

- 14:00 ET - FOMC Rate Decision

Thursday

- 08:30 ET - Continuing Claims

- 08:30 ET - Initial Claims

- 08:30 ET - Productivity-Prel

- 08:30 ET - Unit Labor Costs - Prel

Friday

- 08:30 ET - Average Workweek

- 08:30 ET - Avg. Hourly Earnings

- 08:30 ET - Nonfarm Payrolls

- 08:30 ET - Nonfarm Private Payrolls

- 08:30 ET - Unemployment Rate

Earnings Reports This Week

Monday:

After the bell: NTR, MOS, DVN, NXPI, MGM, WMB, EXPE, CAR, FANG, CTRA, CLX, SANM, CC, AMKR, KMPR, FMC, LEG, LOGI

Tuesday:

Before the bell: BP, MPC, PFE, PARA, CMI, LEA, ETN, CNHI, DISH, EL, EXPD, ITW, TEVA, WLK, FIS, LDOS, DD, HSIC, SPGI, DK, PEG, AGCO, CNP, BIIB, MPLX

After the bell: PRU, AIG, SBUX, AMD, OKE, MUSA, AMCR, EIX, AIZ, YUMC, CZR, OMI, RNR, HRB, CWH, WCN, VOYA, ABNB, REZI, HLF

Wednesday:

Before the bell: CVS, ABC, JCI, CDW, LNG, EMR, SUN, MRNA, MAR, BWA, TT, GOLD, CQP, FTS, REGN, BIP, ODP, BHG, NI, YUM, SBGI, VMC

After the bell: ET, MET, PAA, ALL, FLEX, UBER, PXD, CTSH, LNC, LUMN, CTVA, DCP, ES, UGI, CF, BKNG, EBAY, APA, CLR, GXO, MRO, SFM, CERN, AFG, ATO, CHK, GFL, IR

Thursday:

Before the bell: CAH, MT, COP, BUD, ARW, CBRE, IMOS, BCE, WRK, BDX, WCC, TEN, D, PH, APTV, BERY, PWR, K, BLL, ADNT, SRE, APD, W, HII, NSIT, COMM, ZTS, ICE

After the bell: MCK, NIO, EOG, OPEN, SQ, RGA, ED, ZG, UNM, RSG, DVA, AES, NWSA, PBA, Y, BCC, CWK, VRTX, MELI, LYV, MTZ, AEE

Friday:

Before the bell: CI, ENB, GT, NRG, TU, FLR, QRTEA, IEP, FYBR, AXL, UAA, BEP, SR, GTN, SPB, SSP, CNK, KOP, FLOW, BKI, TILE