Gearing up for a busy week: It typically doesn’t get any bigger than this

Markets

The stock market maintained its upward momentum as it kicked off a pivotal week filled with earnings releases and economic updates.

On Monday, all three major U.S. indexes posted modest gains. Tesla stock notably continued its rebound, reaching its highest level since March 1, following CEO Elon Musk's success in China, and the company is set to deploy autonomous driving services, leveraging mapping and navigation functions provided by the Chinese technology giant Baidu,

Tomorrow promises to be a busy day for earnings, with a slew of retail stalwarts on tap.

Additionally, attention will be fixated on the Federal Reserve's policy announcement scheduled for Wednesday. While the US central bank is widely expected to remain on hold, traders will be eager to discern any signals from the Fed regarding the possibility of future interest-rate cuts, which could have significant implications for investor sentiment and market dynamics.

Shares of Tesla (TSLA) experienced a significant surge in US morning trade following a pivotal win for Chief Executive Elon Musk during a swift trip to China.

Beijing's approval for Tesla to launch its advanced driver-assistance service in China, the company's second-largest market, served as a green light for investors.

Tesla's stock soared by 12% in recent trading, reaching around $188. This surge comes after the stock hit a low point last Monday at $142.05.

In addition to this positive development, Tesla reassured investors by committing to accelerate the introduction of new models, despite reporting its lowest first-quarter profit since 2021.

In a market prone to drama these days, there was some turbulence as stocks wavered during the US afternoon trading session after the US Treasury surprised investors with an overshoot in its borrowing estimate. Released on Monday afternoon, the new estimate stood at $243 billion, which was $41 billion higher than expected.

This news disappointed those who were anticipating a potential catalyst for a market rally. Some had hoped for the borrowing estimate to come in lower, as higher tax receipts could have suggested healthier fiscal conditions.

However, the $41 billion difference, while significant, pales in comparison to the vastness of the US debt market. This adjustment will likely be quickly overshadowed by other developments after Wednesday's refunding announcement.

In essence, while any deviation from the expected borrowing estimate can influence market sentiment, in the grand scheme of things, the $41 billion discrepancy may be perceived as relatively minor in the context of the broader financial landscape.

It doesn’t get any bigger than this

Traders are gearing up for what promises to be a momentous macro week amid Fed week. It typically doesn’t get any bigger than this.

However, with US rate cuts now likely deferred to the second half of the year, if they materialize at all in 2024, some of the anticipation surrounding the May FOMC decision has diminished as it’s tough to see the Fed out-hawking the markets or providing a dovish surprise for that matter.

The risks around the Fed's mandate appear more balanced compared to the peak of the inflation scare, but recent readings on core price growth leave little to the imagination: inflation remains the primary concern, overshadowing worries about job losses, despite the feeling of addressing past challenges.

Unless there is a significant change in the macroeconomic landscape before the June FOMC meeting, the next dot plot is expected to show a higher median projection for 2024. 

Still, the ongoing debate among investors regarding the number of rate cuts expected in 2024 is unlikely to be resolved conclusively by Wednesday's policy update, and this ambiguity may be intentional amid a highly data-dependent Fed.

However, what is clear is that the rationale for three "insurance cuts" in 2024 has diminished significantly.

The highlight of this week's data releases is undoubtedly the April nonfarm payrolls report. The consensus estimate for the headline figure sits at 250,000, indicating another robust print following the blockbuster numbers from the previous month.

 However, given the onslaught of macroeconomic data typical for the start of the month, compounded by Chair Powell's press conference, this week may not only bring about significant headline figures but also volatile market reactions. It's shaping up to be one of those weeks where staying ahead of the data will prove challenging.

Oil markets

Oil prices experienced a decline on Monday, driven by optimism surrounding the potential for a cease-fire in the Middle East, coupled with growing uncertainties regarding the timing of the US Federal Reserve's interest rate decisions. Hopes for a cease-fire in the region, which hosts critical oil trade routes, served as the primary catalyst for the price downturn.