- The US economy added 178,000 new jobs in March.
- Market participants are keeping an eye on US-Iran negotiations.
- Market sentiment is improving as markets anticipate a strong earnings season.
Equities ended higher on Monday, continuing last week’s rebound from this year’s lows. The rebound came amid better-than-expected US data and optimism about progress in talks between the US and Iran. Meanwhile, market participants are awaiting US inflation figures for clues on future Fed policy decisions.
Last week, the US released upbeat economic data, including GDP, retail sales, and employment. Notably, the nonfarm payrolls report on Friday revealed that the US economy added 178,000 new jobs in March. The figure came in above the forecast of 65,000, indicating a rebound in the economy. However, the data also showed that job losses in the previous month were higher than previously reported.
However, data on Monday revealed slower-than-expected growth in the US services sector. The ISM services PMI came in at 54.0, missing the forecast of 54.8. Nevertheless, traders remained optimistic amid ongoing talks between the US and Iran. Progress in these talks could result in a ceasefire deal that would put a pause to a month-long war.
The war between the US and Iran has driven oil prices higher, raising concerns about higher inflation. An increase in price pressures in the US would push the Fed to increase borrowing costs and cool the economy. Such a move would hurt businesses and, in turn, the equities market.
However, there is also a chance that the war will escalate if the two countries do not reach a deal on time. Trump has called on Iran to open the Strait of Hormuz or face an escalation in the war. Therefore, market participants remain cautiously optimistic.
Furthermore, sentiment is improving as markets anticipate the upcoming US earnings season. Economists expect companies to report strong earnings, which will propel equities higher.
The S&P 500 futures index has trended lower since the start of the year. However, the solid US data and improving market sentiment have allowed the index to rebound. Still, the market needs more to resume the previous rally.
This week, traders will watch key US reports on inflation. Economists forecast a sharp spike in annual price pressures from 2.4% to 3.4%.
