Several events will test the stock market this week

The investing world heads into the first full week of June with a slew of events that will test the market’s mettle.

Primarily, the action will be focused around Washington and other global capitals for a look ahead on how the economy is shaping up. Neither rain nor sleet nor a real bummer of a May jobs report could derail the market last week, so it will be interesting to see how investors react to this week’s news.

Jamie Dimon, chief executive officer of JPMorgan Chase & Co.

Christophe Morin | Bloomberg | Getty Images
Jamie Dimon, chief executive officer of JPMorgan Chase & Co.

The business perspective

Tuesday might turn out to be the most interesting day of the week. That’s when the Business Roundtable will release its 2017 CEO Economic Outlook survey that will provide clues on what the titans of industry think about the road ahead.

The survey will indicate what plans companies have for capital spending, their expectations for sales and whether they will be hiring. Last Friday’s nonfarm payrolls report, which showed growth of just 138,000, cast doubt on how robust the employment climate will be.

In addition to Tuesday’s presentation, the roundtable on Wednesday will talk about the job “skills gap,” or the difficulty employers are having finding workers qualified for open positions.

JPMorgan Chase CEO Jamie Dimon leads the group and will be joined Wednesday by Ginni Romerty of IBM, Wes Bush of Northrop Grumman and Labor Secretary Alexander Acosta.

On the legislative front

Meanwhile, Congress and President Donald Trump will have a full slate of items to consider with far-reaching consequences.

The highlight of the week is an expected vote on the Financial Choice Act, a measure that would roll back reforms to the banking industry made after the financial crisis and the Great Recession.

Among other things, the bill would limit the government’s ability to declare big institutions “too big to fail” and would cut annual stress tests to every two years. In addition, the Consumer Financial Protection Bureau also would face substantial changes, and likely would change restrictions banks face on trading for their own benefit.

Bank stocks were the big winners after Trump’s election, surging nearly 30 percent at one point. However, their fortunes have changed lately and they’re down as a group nearly 9 percent over the last three months.

Former FBI director, James Comey.

Anadolu Agency | Getty Images
Former FBI director, James Comey.

The Russia probe

Not that the markets seem to care, but there remains this small matter in Washington over allegations that Trump campaign principals had improper contact with Russia.

This week could provide some real drama in that regard. The big day will be Thursday, when former FBI Director James Comey will testify.

None of this Russia business has had a tangible effect on the markets so far. But if Comey comes into that room with some type of smoking gun regarding collusion, or efforts by Trump to get Comey to back off on the investigation while he ran the bureau, that might make investors finally care about instability in the White House.

Busy week for the economy

The beginning of the month means we start another round of economic data, and there’s a ton of it ahead. A quick glance:

  • Monday: Nonfarm productivity, unit labor costs, ISM non-manufacturing, factory orders and durable goods.
  • Tuesday: Job Openings and Labor Turnover Survey, or JOLTS, a preferred indicator for Fed policy makers.
  • Wednesday: Consumer credit
  • Thursday: Quarterly services survey, an under-the-radar indicator that can influence GDP outlook for economists.
  • Friday: Wholesale inventories.

In addition, the European Central Bank on Thursday will issue its latest statement on monetary policy. And UK elections will take place the same day; an upset of Prime Minister Theresa May most certainly would carry reverberations.

A final word

Though there was much chattering about Friday’s jobs report, the stock market actually rose during the session, which seems counterintuitive for such an important indicator.

Or maybe not.

Voya Global Perspectives offers this take on why the market actually liked the anemic job growth:

I refer to it as “Goldilocks” since it is not too hot and not too cold to force the Fed to change course at their June FOMC meeting where I expect a 25 basis point rate hike. The modest report likely gives the Fed room to pause through the next few meetings. Very market friendly indeed.

Investing’s a funny game. Here’s to a big week ahead!

This entry was posted in Markets. Bookmark the permalink.

Leave a Reply