Importance of the economy| Weekly Extract April 10

This week reminded us all of the importance of the economy and the impact it can have on the markets. In a 4-day work week, it was expected from a technical point of view, a small correction in most of the indices. This is what happened throughout the week, but on the last day of the week, the S&P 500 and Nasdaq reversed early declines as risk-averse investors anticipated monthly employment data to get a clearer picture of the economy. Significant tech and growth stocks recovered early losses and rose between 0.5% and 0.8%, supporting the Nasdaq.

Moving into more specific data, new claims rose to 228,000 last week, considerably above the 200,000 anticipated according to the Labor Department. The data comes on the heels of this week's weaker-than-anticipated reports on manufacturing orders, job openings and private payrolls. On Friday, the long-awaited March jobs report is expected to be released, another possibly market-shocking data and highlighting the importance of the economy. The jobs report to be released tomorrow is expected to show that the economy added 239,000 jobs in the previous month.

Futures traders are increasing their bets on a pause in the Federal Reserve's rate hike plan due to signs that the economy is slowing. Compared to a smaller number of traders forecasting a quarter-point increase next month, another portion of traders are projecting a pause.

First Quarter

First-quarter earnings season begins with the largest U.S. banks the following week, a month after the industry turmoil caused by the failure of Silicon Valley Bank and Signature Bank. Investors will be paying close attention to what bank executives have to say about consumer lending trends and overall consumer behavior. This is of great importance to the economy and among that, the effect it could have as we enter a recession this summer. According to ADP data, payrolls increased by 145,000 rather than the 200,000 jobs expected to be added. In addition, February data for job openings and industrial orders were lower than expected.

Unemployment claims

Initial jobless claims declined to a seasonally adjusted 228,000 for the week ended April 1 compared to forecasts of 200,000 claims, adding to a flurry of statistics pointing to a weak labor market. An additional 48,000 applications were filed, according to revised Labor Department data from the previous week. Attention now turns to the importance of the economy and the more complete report on nonfarm payrolls, which are expected to have grown by 239,000 in March, down from the 311,000 jobs added in the prior month. All of this data is more in line with the reality that the labor force is not as robust as believed in recent months.