The Fed Meeting and New Jobs Data Will Likely Drive Stocks in the Week Ahead

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The Federal Open Market Committee (FOMC) — a branch of the Federal Reserve — will reconvene Tuesday and Wednesday to decide where interest rates are headed next, and investors will be following along closely.

But while market watchers are eagerly awaiting the committee’s decision, “emotions are less of a catalyst” this year than last, says Mark Hackett, chief of investment research at Nationwide.

In 2022, investors were quite reactive to geopolitics, inflation, Fed policy and interest rates, he adds. But this year is a different story, with data like economic and corporate earnings reports driving markets, and volatility notably calmer.

Still, Hackett says there’s a lot of pessimism and skepticism, which could cause the markets to experience weakness and volatility in the near term.

Here’s what investing experts will be watching the week of May 1:

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Fed meeting

The U.S. central bank has been raising interest rates for about a year in an attempt to tamp down inflation — a move that has also weighed on the price of financial assets, like stocks. While inflation has cooled, experts say it’s likely too early for the Fed to pause its rate hikes, and on Wednesday, the Fed is widely expected to raise interest rates by another quarter percentage point.

“The Fed would rather be wrong by cutting rates late than be wrong by pivoting early,” Johan Grahn, head ETF market strategist at Allianz Investment Management, said in written commentary shared with Money.

Investors will also be watching for any signals about what the committee plans to do at future meetings.

“There will a lot of scrutiny around this Fed decision and comments about future potential hikes,” says Derek Amey, managing partner and co-chief investment officer at StrategicPoint Investment Advisors. But those who expect the Fed to clearly signal that a pause is coming may be disappointed, he adds.

Jobs report and more economic data

On Tuesday, U.S. Bureau of Labor Statistics will release its data on job vacancies, and later in the week, the bureau will provide the latest unemployment numbers.

“Investors will be asking themselves, ‘Is bad news good news? Or is bad news in fact bad?,’” Amey says about the unemployment report.

A strong labor market may be considered quote-unquote “good news” — but it may also mean the Fed will hike interest rates more to cool economic activity. And more rate hikes could be “bad news” for investors.

Updates on the labor market aren’t the only economic reports that will be released in the week ahead. On Monday, we’ll see measures from the Institute of Supply Management, which provides insight into U.S. manufacturing activity. The last survey showed that a closely watched gauge of that activity had dropped to its lowest level since May 2020.

More earnings

Earlier this month, ahead of companies reporting their revenues, sales and other measures of business performance for the first quarter, investors were bracing for bad news. (Earnings reports are a strong driver of stock prices, so poor results can hurt a company’s stock price while strong or better-than-expected results can help them.)

But it hasn’t been as bad as forecast. While “the numbers haven’t all been rosy, the surprise factor is more positive than expected,” Liz Young, head of investment strategy at SoFi, wrote in a blog post.

Given that earnings season came with anticipation for negative results, what we’ve seen so far has “kept markets afloat for the most part and offered investors a reason to believe things may not end up as bad as feared,” she added.

Still, market watchers will be keeping a close eye on how the rest of the reports come in. Apple, Warner Bros Discovery, AMC Entertainment and Marriott International are some of the major companies scheduled to report their earnings in the week ahead.

More from Money:

Why Stocks Could Fall Again as Companies Start Reporting Earnings

Why April Could Be a Strong Month for the Stock Market

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