The first quarter of 2023 ended much the way it began – with investors hoping that economic conditions are strong enough for the Fed to relax interest rates. Going back to January, the stock market rallied on that hope and by February, those hopes were dashed due to hotter-than-expected inflation data.

Then the banking crisis happened in March and investors once again found themselves hoping the Fed would cut rates to bring stability back to the markets. Once again, those hopes were dashed as the Fed raised rates in March by 0.25 basis points.

And yet, while that happened, the major index’s were flat to positive to end the quarter.

The Nasdaq 100 closed the first quarter by entering into bull market territory, after rising more than 20% since October, 2022. It may not see that way and that’s mostly because the gains have come from a few companies rather than the broader market.

It’s the quality companies that are leading the way.
Nvidia (NVDA) is up 85%, which represented 2.8% of the index’s performance
Apple (AAPL) is up 23%, representing 2.8% of the index’s performance
Microsoft (MSFT) is up 17%, representing 2.2% of the index’s performance
Meta Platforms (META) is up 70%, representing 1.7% of the index’s performance
Tesla (TSLA) is up 57%, representing 1.6% of the index’s performance

In the previous four bull markets of the Nasdaq, the index had returns of at least 100%. History suggests that it’s not too late to get involved.

Speaking of quality, look at the returns of quality stocks after the Fed hiking cycle ends.

In short, quality stocks refers to companies that maintain earnings growth, continue to grow dividends, and are in stable sectors. For example, the Healthcare sector still has strong earnings, despite the last year. Pricing for healthcare stocks are valued below market average and could be an interesting sector as the Fed hiking cycle ends.

Now, let’s get you ready for the week ahead by looking at the reports that can move the markets.

Monday – 10:00 am EST – ISM Manufacturing Index – The composite index ranges from 0 to 100 and anything sub-50 shows contraction. The ISM index has been less than 50 for the last four months and the market is expecting the number to drop slightly from 47.7 last month to 47.5. It’s a bearish indicator, but will investors take notice?

Thursday – 8:30 am EST – Jobless Claims – The market keeps a watchful eye over jobless claims as the jobs market remains strong, despite media outlets focusing on job losses across the market. Claims are supposed to rise slightly from 198k last week to 201k this week, bringing the 4-week moving average to 198.25k. This is still a very healthy number.

Friday – Markets closed

Friday – 8:30 am EST – Employment Situation – The unemployment rate is expected to remain unchanged at 3.6%, but remember the Fed is expecting unemployment to be greater than 4%, so a rising rate would be a bullish sign. Nonfarm Payrolls month-over-month are supposed to rise 240k, but that’s down from last month’s 311k report and much less than January’s 500k number. The other number to watch for is the average hourly earnings year-over-year. While the number is still 4.3% higher than March last year, it’s projected to be lower than February’s 4.6% reading. A lower number (sorry workers) would help wage inflation head lower.

With it being a shorter week, this could be the calm before the storm before we get into another round of earnings.

Happy trading! See you tomorrow!

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