Nasdaq 100, Dow Jones, S&P 500: US Stock Traders Eyeing Earnings, Inflation, Debt Ceiling

Highlights

• U.S. Stocks Rally on Strong Jobs Data and Apple’s Impressive Earnings
• Regional Bank Shares Rebound on Upgrades and Strategic Options
• Treasury Secretary Warns of Economic Calamity if Debt Ceiling Not Raised

Overview

The major U.S. stock indices rose on Friday despite the fact that the number of jobs added in April was higher than what Wall Street had predicted. The U.S. economy added 253,000 jobs in April, surpassing Dow Jones’ expectation of 180,000 new jobs. The labor market surge may encourage the Fed to hold rates at high levels in order to combat inflation. Higher rates tend to weigh on demand for stocks.

Apple’s Q2 Beats Expectations

Apple reported impressive numbers for the fiscal second quarter on Thursday, beating expectations in both revenue and profit, mainly due to strong sales of iPhones. As a result, Apple’s shares increased by around 4.7%.

This news, combined with the positive jobs data, caused U.S. stocks to rally on Friday. The Dow had its biggest one-day percentage gain since Jan. 6, largely because of Apple’s surge in share price. This indicates that the labor market is still strong and resilient.

Regional Bank Stocks Rebound on Upgrades

Regional bank stocks experienced a rebound boosted by JPMorgan’s note, which upgraded Western Alliance, Zions Bancorp, and Comerica to overweight. The bank noted that these three companies were “substantially mispriced,” partly due to short-selling activity. This resulted in a more than 6% advance for the SPDR S&P Regional Banking ETF (KRE).

Despite this, shares of PacWest dropped sharply this week on news that it is considering strategic options, including a sale. However, it rebounded sharply by 81.7%. Additionally, Western Alliance also jumped by 49.2%.

This bullish momentum was also fueled by analysts upgrading a number of oversold lenders, resulting in a rebound for regional bank shares after declines tied to the collapse of First Republic Bank. However, some analysts believe that the fallout in the regional banking sector is not yet over, despite Friday’s rebound.

The issue is not necessarily deposit flight, but rather the mark-to-market of securities on all their books, which presents a universal challenge for liquidity. As a result, this news cycle may not be over yet and may not die of natural causes.

Looking Ahead…

This week, investors will get the opportunity to react to key reports on U.S. consumer inflation, U.S. producer inflation and consumer sentiment. On the earnings front, Monday’s spotlight is on PayPal Holdings. Tuesday’s key issue is Airbnb. Disney reports on Wednesday.

Traders will also be watching the situation in Washington over the debt ceiling that is rapidly approaching the crucial stage.

On Sunday, Janet Yellen, the Treasury Secretary, warned that if the debt ceiling is not raised, it will lead to a severe economic downturn in the United States. She also restated her earlier caution that the Treasury Department may exhaust its options to meet its debt obligations by June.

According to Yellen, the department has been employing exceptional measures to prevent default, which cannot continue indefinitely. Therefore, she urges Congress to take necessary action to avoid an “economic calamity” as it is commonly believed that a financial and economic crisis will occur if no action is taken. Yellen made these statements during an interview on ABC’s “This Week.”