Top Five Things to Watch in the Markets Next Week by Investing.com

By Noreen Burke

Investing.com – The stock jolt caused by the rapid rise in Treasury yields appears destined to continue to be a major focus for markets next week, especially if stronger economic data pushes Treasury yields even higher. Investors will focus on Friday’s job report, which is expected to show that virus restrictions kept job growth in February. The appearances of several Federal Reserve speakers, including President Jerome Powell, will also be closely watched. The OPEC + coalition is expected to moderately increase oil production at its meeting on Thursday, with prices close to 13-month highs. In Europe, the UK budget expires on Wednesday, while eurozone economic data will show how the economy is coping with ongoing pandemic restrictions. Here’s what you need to know to start your week.

1. Tug-of-war between stocks, increased bond yield

The shift to energy, financial and other stocks that are expected to benefit from the economic reopening has accelerated, while rapidly rising Treasury yields are putting pressure on technology stocks that have spearheaded market gains for years.

Technology stocks are particularly sensitive to rising yields because their value depends heavily on future earnings, which are discounted more deeply when interest rates go up.

A Fed that looks dovish, along with expectations of further stimulus, boosted higher yields and fueled concerns about inflation and the two-way market looks set to continue, at least in the short time.

Meanwhile, the earnings season is ending, but retailers will still be reporting, with Target (NYSE :), Kohl’s (NYSE 🙂 and Nordstrom (NYSE 🙂 are due to publish numbers on Tuesday, followed by Costco (NASDAQ 🙂 on Thursday.

2. February jobs report

With President Joe Biden’s $ 1.9 trillion coronavirus relief package, the Friday to February non-farm payroll report will show how the recovery in the labor market is faring.

Government data at the end of last week showed that initial claims for unemployment benefits unexpectedly fell to their lowest level in three months, indicating that the slowdown in the infection rate is allowing the labor market to gain some strength. Retail sales also recovered in January.

Economists expect the US economy to create new jobs in February, after the 49,000 increase in January. But the winter storms that swept the South can complicate the picture.

3. Powell’s speech

With the rapid spike in Treasury yields clouding, stock market investors can expect Fed officials to resolve the liquidation of Treasury bills.

Fed Chairman Jerome Powell is due to speak about the economy at an online event organized by the Wall Street Journal on Thursday. So far, there have been little signs of anxiety among Fed officials about the Treasury’s higher yields.

Last week, Powell said the upward movement was the result of a stronger economy, but added that the rate of economic recovery has slowed in recent months and reiterated that monetary policy will remain easy for some time.

Other Fed officials who will make appearances include New York Fed chairman John Williams, Fed governor Lael Brainard, Atlanta Fed chairman Raphael Bostic, San Francisco Fed chairman Mary Daly, chairman of the Fed. Philadelphia Fed, Patrick Harker, and Chicago Fed Chairman Charles Evans.

4. OPEC + meeting

With oil prices at 13-month highs, the OPEC + producers’ meeting on Thursday is expected to discuss increased production starting in April.

The Organization of Petroleum Exporting Countries and allies, known as OPEC +, cut production by 9.7 million barrels a day last year, while the pandemic devastated global demand.

OPEC + sources estimate that an increase in production of 500,000 bpd seems possible without causing an increase in inventory, as economies recover.

Russia wants to increase supply. Saudi Arabia’s voluntary 1 million bpd cut also expires in March, and supplies may return from April.

5. UK budget, eurozone data

In the UK, finance minister Rishi Sunak will promise more budget spending on Wednesday, but it could be the last pandemic-related support he offers. The budget is expected to accumulate more loans in addition to nearly 300 billion pounds ($ 418 billion) of COVID spending and tax cuts.

The budget plan will be closely monitored, as it will be one of the biggest determinants of the pace of economic recovery.

Meanwhile, in the eurozone, data on PMIs and will show how the economy is doing before the European Central Bank meeting in March.

– Participants contributed to this report