Wall Steet Week Ahead: Upbeat Jobs Data Could Soothe Nerves
People walk by the New York Stock Exchange (NYSE) in New York's financial district.Reuters

American investors await a crucial monthly jobs report, due out this week, which could reveal that the recent setbacks to the world's leading economy, caused by bad weather, were impermanent.

4 April's monthly nonfarm payrolls report, the most widely tracked US economic indicator, is expected to show that US firms added 200,000 jobs in March, according to a Reuters poll of economists.

Wall Street will be tracking ISM data, car sales data and the ADP's private-sector payrolls report for March through the week.

Market participants will also be tracking US trade deficit figures for February and earnings updates from Monsanto and Micron Technology, due this week.

ISM Data

The Institute for Supply Management (ISM) will release the results of its national surveys on the manufacturing and services sectors for March this week. The data is expected to show an improvement over the preceding month.

Upbeat data could confirm to investors that the recent weakness in economic data was brought about by the harsh winter, suggesting that the US economy's growth momentum remains intact.

Improving labour market, alongside a pickup in the manufacturing and services sectors, could also boost the case for the US Federal Reserve's reduction of monetary stimulus.

Upbeat data would also put the focus on when the world's most powerful central bank would begin raising interest rates.

...I believe we could get a snapback in payroll numbers that is significantly better than expected.
- Doug Cote of ING

"We potentially could have a big positive surprise. The polar vortex is over, and I believe we could get a snapback in payroll numbers that is significantly better than expected," Doug Cote, chief market strategist at ING US Investment Management told Reuters.

Danske Bank said in a 28 March note to clients: "In the US, all eyes will be on non-farm payrolls, which delivered a positive surprise in February. We expect that 195,000 new jobs were created between February and March.

"We expect the ISM to rise slightly in March - the US economy still looks reasonably strong from a cyclical perspective."

Capital Economics said in a 28 March note: "The surge in spending on health care triggered by the Affordable Care Act (ACA) supported US personal spending in February. Nonetheless, annualised real consumption growth in the first quarter may still be only 1.5%-2.0%, down from 3.3% in the fourth quarter.

...while consumption growth probably slowed in the first quarter, a strengthening in jobs growth should allow it to accelerate in the second.
- Capital Economics

"With more people having enrolled this month, the effects of the ACA will boost spending in March too. Non-medical spending may also be supported by some of the activity postponed during the bad weather in December and January taking place. Nonetheless, even a 0.4% m/m rise in total spending would generate an annualised gain in real consumption in the first quarter of just 1.8%."

"More generally, the 0.2% m/m increase in wages and salaries will probably be followed by larger gains in the coming months as employment recovers from its recent weather-related weakness. Overall, while consumption growth probably slowed in the first quarter, a strengthening in jobs growth should allow it to accelerate in the second," Capital Economics added.

Downbeat Sentiment

Job growth would boost US investor sentiment, which has suffered a bout of volatility as some major stocks, including biotechs, tumbled last week.

The Nasdaq biotechnology index finished 7% lower for the trading week ended 28 March.

The Nasdaq biotech index has lost about 13% so far this month.

The rebound in US hiring began in February despite the cold weather. Employers added 175,000 jobs last month after creating 129,000 new positions in January.