Stocks should be helped at the start of this week by the successful bombing of Syria without significant repercussions, a decent March Retail Sales report, and good corporate earnings releases.
Strong corporate earnings will likely be pitted against headline risk over the next few weeks, however. Also, fear of an aggressive sounding Fed could weigh on the market as the May 1-2 FOMC Meeting approaches. The risks surrounding some of these factors are balanced. On the one hand, some key earnings reports may disappoint, given how high expectations are. On the other hand, some political/international actions may turn out more restrained than seemed possible, as have other Trump initiatives.
Potentially important, the macroeconomic story may change this Spring. Evidence of softening labor market conditions could build, resulting in market talk of the Fed skipping a hike at the June FOMC meeting. Payrolls should be soft again in April, if last year's pattern holds. In particular, retail jobs should continue to fall sharply this month. The Claims data already have begun to weaken. Even though Initial Claims fell in the latest week, they remained above the March average.
Initial Claims
(monthly average, 000s)
Jan 235
Feb 220
Mar 228
Apr (1st wk) 233
The US economic data over the remainder of April are mostly minor. Monday's March Retail Sales report could be the most important (besides the Claims data ). A stronger-than-consensus print is the risk, given that the delayed tax refunds may have been spent that month and weather improved. Consensus is +0.4% m/m Total and +0.2% Ex Auto. A decent gain in March Retail Sales could result in an upward revision in the Atlanta Fed's projection of Q118 Real GDP from its current 2.0% estimate. Consensus for Q118 Real GDP is 2.5%. The NY Fed's model projects 2.8% Real GDP Growth for Q118 and 2.9% for Q218. Q118 Real GDP will be released April 27.
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