The second quarter has got off to a cautious start, with Wall Street stocks inching further away from last month’s record high and Treasury yields plumbing a five-week low.
But bulls may argue that if the market can successfully navigate the next few days’ “risk” events, then the tone of the earnings season in coming weeks should decide whether US equities can climb into record territory.
The Federal Reserve minutes of its last meeting, released on Wednesday, will be scanned for clues to likely policy trajectory. Given the recent plethora of Fed speakers, it’s hard to imagine the transcript containing significant market-moving information.
Anyway, on balance it’s likely the investors would rather infer a more hawkish tone. It would help address recent concerns about a soft patch in the US economy and any subsequent pick-up in yields would help the heavyweight US banking sector, which is down 7 per cent since reaching a nine-year high at the start of March.
Furthermore, this “good news is good” approach means equity investors will want to see a sturdy private sector jobs report from ADP on Wednesday, and for that to dovetail with the official non-farm payrolls data released on Friday.
Then, providing nothing untoward happens at the Trump-Xi summit later this week, attention can turn to corporate profitability.
And, as Strategas Research notes, April for the S&P 500 tends to be the best month in the first half of the year, showing positive returns 70 per cent of the time since 1950.
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