Jobs Data and Banking Crisis Aftermath: What to Watch in the Stock Market in the Week Ahead

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Even though stocks have since rallied, the fallout from the collapse of Silicon Valley Bank is still top of mind for investors.

“Right now, our biggest concern is how much the banking headlines have impacted economic momentum,” Callie Cox, eToro’s U.S. investment analyst, tells Money.

Here’s what experts will be watching the week of April 3:

More perspective on the banking meltdown

As the Federal Reserve contends with a potentially unstable banking sector alongside stubbornly high inflation, it has indicated that the banking crisis could depress economic activity in the same way an interest rate hike would.

New data on the manufacturing and service industries from the Institute for Supply Management (ISM) expected Monday and Wednesday could provide some insight into whether that slowdown is materializing.

Of course, it’s also possible that it’s too soon to see any impact on the economy caused by the bank sector’s struggles, “given the news is still fresh and the consequences could take time to materialize,” Cox adds. She says that she doesn’t anticipate a material slowdown in these reports, nor in the upcoming jobs reports.

Is the jobs market still too hot?

Two jobs reports at the end of the week — one from payroll provider ADP and one from the Bureau of Labor Statistics — will also provide more information about the state of the labor market and overall economy.

The Fed has been steadily raising interest rates in an attempt to cool the overly hot job market and slow down inflation. Job growth that’s faster than expected will give investors some insight into whether those rate hikes are accomplishing their goal. If job growth is faster than expected, it could signal to the Fed as well as investors that more rate hikes are necessary.

Cox warns that investors may be prone to “overanalyzing the small details” from these reports and the Fed’s reaction to them, “especially with stocks and crypto prices near their [recent] highs.” Not to mention the fact that Wall Street strategists are so divided about whether more rate hikes are on the way.

April is usually a strong month for stocks

We’ll also be kicking off the first full week of April, which could give investors something to look forward to this spring.

Historically, April is one of the best months of the year for the stock market. Data analyzed by Bespoke Investment Group shows that over the past two decades, the Dow Jones Industrial Average has gained an average of about 2.2% in April. The index finished the month in the green 85% of the time.

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