Markets could face another volatile week ahead, as concerns over the deadly coronavirus weigh on sentiment around the world. There are more than 87,600 confirmed cases worldwide and just under 3,000 confirmed deaths, as of Sunday morning. The rapid spread and lack of containment in countries outside of China rocked global markets and all three of the major indices fell into a correction in a matter of six days.
Economic data this week will play a critical role in helping the Federal Reserve assess the damage of the coronavirus on the U.S. economy. Calls for a rate cut on Wall Street have spiked in recent days due to the contagion. According to the CME FedWatch tool, the Fed fund futures indicated that investors are almost 95% sure that the Fed will slash interest rates by 50 basis points at its March policy meeting. Just one week ago, the odds were at 0%.
Friday afternoon, Fed Chair Jay Powell said in a statement, “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”
“The bond market now expects almost four Fed rate cuts by the end of the year, but one might rightly wonder how lower short-term rates would alleviate supply chain disruptions,” Wells Fargo pointed out in a note Feb. 28. “We believe the Fed will try to remain patient, and look for a ‘material’ change in the outlook, but if and when the committee decides it needs to ease again, it most likely won’t be just once.”
The February jobs report will be one of a handful of key economic data releases this week. Economists polled by Bloomberg expect the U.S. economy added 175,000 jobs in February, down from 225,000 added in January. The unemployment rate is anticipated to have ticked lower to 3.5% from 3.6%.
The coronavirus should have little impact on February’s figures, and data should reflect solid payroll gains, according to Nomura. “Labor market indicators in February were generally firm with solid readings on employment subindices for business surveys, low initial jobless claims and still-healthy consumer-related indicators,” the firm said in a note Feb. 28.
Wells Fargo echoed Nomura’s predictions. “Employers have added an average of 206K jobs over the past six months, and most labor market data for February suggest the healthy rate of job growth should continue. Initial jobless claims have moved back toward their 50-year low after spiking in December, and the Conference Board’s survey of consumers shows a healthy proportion still see jobs as plentiful.”
This week is also gearing up to be a big week for politics with so-called Super Tuesday in focus. Super Tuesday will take place March 3 and is biggest primary day in which the most states hold nominating contests in one day. Fourteen states and one U.S. territory will be holding nominating contests and will award a total of 1,357 delegates.
“The Democratic primaries in 15 states next week may take a back seat as coronavirus concerns dominate,” Capital Economics wrote in a note Feb. 28. “But Bernie Sanders is on course to again be the big winner, potentially adding fuel to the stock market sell-off. Arguably the bigger uncertainty now is whether a coronavirus outbreak could disrupt the rest of the Democratic primary calendar, including a delay to the National Convention in mid-July. The real ‘black swan’ would be if a nationwide epidemic threatened November’s elections.”
Corporate earnings season has wound down significantly, but investors will be paying close attention to big box retailer Target’s (TGT) earnings Tuesday ahead of the opening bell. Target’s fourth-quarter results follow the company’s weaker-than-expected holiday sales announcement in mid January. The retailer’s same-store sales during November and December grew a meager 1.4% compared to 5.7% a year ago.
At the time, Morgan Stanley analyst Simeon Gutman predicted, “January sales likely bounced back. We don’t think the November/December comp that was comparing against a longer Holiday period in 2018 is necessarily indicative of the business going forward. While the +1.4% Q4 comp guidance implies a similar January to the Holiday result (+1.4%), we think there is conservatism in this estimate.”
Analysts polled by Bloomberg predict Target will report adjusted earnings of $1.66 per share on $23.26 billion in revenue during its fiscal fourth quarter. Same-store sales, a key industry metric, is expected to have jumped 2.2% boosted by strength in its private label brands and store remodels.
Target stock has been a strong performer over the past 12 months and surged 40%, while the broader market rose 6.7% during the same time period.
Monday: Markit US Manufacturing PMI, February final (50.8 expected, 50.8 prior); Construction Spending month-on-month, January (0.6% expected, -0.2% in December); ISM Manufacturing, February (50.5 expected, 50.9 in January); ISM Price Paid, February (51.2 expected, 53.3 in January)
Tuesday: Wards Total Vehicle Sales, February (16.80 million expected, 16.84 million in January)
Wednesday: MBA Mortgage Applications, week ended Feb. 28 (1.5% prior); ADP Employment Change, February (170,000 expected, 291,000 in January); Markit US Services PMI, February final (49.5 expected, 49.4 prior); Markit US Composite PMI, February final (49.6 prior); ISM Non-Manufacturing Index, February (55.0 expected, 55.5 in January)
Thursday: Challenger Job Cuts year-on-year, February (27.8% in January); Initial Jobless Claims, week ended Feb. 29 (215,000 expected, 219,000 prior); Continuing Claims, week ended Feb. 22 (1.724 million prior); Bloomberg Consumer Comfort, week ended March 1 (63.5 prior); Factory Orders, January (-0.2% expected, 1.8% in December); Durable Goods Orders, January final (-0.2% prior); Durable Goods excluding Transportation, January final (0.9% prior)
Friday: Trade Balance, January (-$48.5 billion expected, -$48.9 billion in December); Change in Nonfarm Payrolls, February (175,000 expected, 225,000 in January); Change in Manufacturing Payrolls, February (-4,000 expected, -12,000 in January); Unemployment rate, February (3.5% expected, 3.6% in January; Average Hourly Earnings month-on-month, February (0.3% expected, 0.2% in January); Average Hourly Earnings year-on-year, February (3.0% expected, 3.1% in January); Wholesale Inventories month-on-month, January final (-0.2% prior)
Tuesday: AutoZone (AZO), Kohl’s (KSS), Target (TGT) before market open; Nordstrom (JWN) after market close
Wednesday: American Eagle Outfitters (AEO), Zoom Video Communications (ZM) after market close;
Thursday: Burlington Stores (BURL), Kroger (KR) before market open; Costco (COST) after market close
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.