Earnings season for the first quarter begins, labor market and wages in the USA.

Chart of the week

The overview shows which companies will publish their earnings for the first quarter of 2024 and when this month.
Why this is important
In recent quarters, the change in investor sentiment has always been the same. At the end of the quarter, concerns grew that the economy would not cool down and that the US Federal Reserve would therefore be less likely to cut interest rates. These fears drove share prices down. Then companies delivered excellent average earnings results and everything was forgotten again. The stock market turned upwards. Will the same happen this quarter?
The earnings season usually starts with the banks (1, black circle). This gives an early general insight into how the economy performed in the first quarter. The next big chunk that will attract a lot of attention is April 18 (2, black circle). On this day, TSMC, the world's largest semiconductor manufacturer, and Netflix will present their figures. This provides the first insight into the technology and streaming industry.

However, the most important week is traditionally week 4 (3, black circle). This is when most of the Magnificant 7 stocks report their quarterly figures. Microsoft, Google, Tesla, Facebook and Amazon. Nvidia traditionally comes a little later, on May 22.

A week later, on 1 May, the next meeting of the US Federal Reserve is on the agenda.

If you still want to go on spring break, it is best to do so before the 23rd.

The chart shows the quarterly change in average S&P 500 company profits to date (blue line). In the last quarter, these rose by 8%. An increase of 5% is expected for the first quarter of 2024 (orange line). The reason for the slight decline is falling margins:

As costs in the labor market have risen somewhat in recent months, margins are generally expected to fall slightly. However, these should then increase again for the rest of the year. Particular attention is being paid to the companies' explanations and especially the forecast for next year.

Labor market and economy in the USA

New figures on the development of the labor market were published last Friday. This continues to develop strongly. The chart above shows in blue the average development of newly created jobs over the last 10 years. Last year's figure is in green and this year's figure is in red. There is no sign of an economic downturn or even a recession. This reduces the likelihood of an interest rate cut and was therefore poorly received by the markets.

The chart shows the details behind the newly created jobs. Only in the transportation and storage sector did jobs decrease, otherwise new jobs were created in all sectors. The increase is therefore not due to a special situation in one sector, but the strength can be observed throughout the economy.

The chart above is somewhat worrying. Wages for employees who change jobs have risen sharply (blue line). This should soon be reflected in higher inflation figures. This is another sign that inflation could rise and that the US Federal Reserve will not cut interest rates.
Rising wage costs are primarily a problem for the service sector. Wages are one of the highest cost factors in this sector.

The chart shows the current dilemma. In the industrial sector (shown with the purchasing manager of the manufacturing industries, light blue), we are in a recession. However, as the service sector (represented by the index showing customer spending in the service sector, dark blue) is developing very strongly, this may compensate for the poor development in the service sector. If wages in the service sector are now rising, this will have a greater impact on inflation than usual.
The battle between the bulls (investors who expect stock markets to rise) and the bears (investors who expect stock markets to fall) continues.

The bears currently have the upper hand and a cautious investment policy is advisable. It makes sense to hold a little more cash than usual in order to get in at a lower price.