[Weekly Outlook-New York Stock Market] Iran's Breathtaking Choice... Non-Farm Employment Also 'Watched'

This week, the New York stock market is expected to focus on whether peace talks between the United States and Iran will progress and the health of the job market.

*Image*

Strait of Hormuz

Late last week, Iran presented a new peace proposal to the United States through mediator Pakistan. Some media outlets reported that this proposal also included discussions on nuclear negotiations.

Previously, Iran had proposed to the US that the two countries first agree on a ceasefire, completely open the Strait of Hormuz, and then begin nuclear negotiations. However, after US President Donald Trump rejected the offer, Iran presented a new negotiation proposal.

Although the US has received the new proposal, it is uncertain whether it will agree to it. US President Donald Trump has repeatedly stated that the US military's blockade of Iranian waters has been quite effective and that he will continue the war of attrition until Iran makes a satisfactory offer.

On the 1st, Trump said, "We will finish this (Iran war) properly" and "We will not withdraw early from Iran and let the problem recur in three years."

Since the outbreak of this war, Iran has seen its economic difficulties deepen with soaring inflation and exchange rates against the dollar. The value of the Iranian rial, its legal tender, plummeted by about 15% last week alone, and prices surged by about 7 times compared to the same period last year. The rapid deterioration began in earnest after the US military's naval blockade of Iran.

The more anxious Iran becomes, the more likely it is to engage in negotiations more actively. This means that the two countries could quickly resume a second round of peace talks.

Meanwhile, the US April non-farm employment figures are a key variable. If the employment figures show a solid trend, concerns about stagflation (economic recession amidst high inflation) are expected to ease despite soaring inflation.

According to estimates from financial information firm FactSet, non-farm payrolls in April are expected to be only 50,000. This is significantly lower than the market's expectation of 178,000 in the previous month. The unemployment rate is projected to stabilize at 4.3%.

Bob Lang, chief options analyst at Explosive Options, said that strong employment figures could be good news for the stock market but would not significantly impact interest rate forecasts, explaining, "The recent Federal Open Market Committee (FOMC) meeting showed a lack of support for an easing bias, which means the likelihood of an interest rate cut anytime soon has decreased."

According to the CME FedWatch Tool, the federal funds rate futures market is reflecting a 77.7% probability that the benchmark interest rate will remain frozen until the end of December this year. The probability of a 25bp rate hike is 9.1%, and the probability of a 25bp rate cut is 12.3%.

If inflation does not rise further, the freeze is likely to be maintained. This means that the interest rate path will not be a variable for the stock market this year.

As May begins, the stock market adage 'Sell in May and go away' is again drawing attention.

According to analysis by JP Morgan's trading desk, the S&P 500 index rose by an average of 1.5% in May over the past 10 years. It recorded an average increase of 1.9% in June and 3.4% in July.

There are hopeful voices suggesting that this time could be different. Jeff Hirsch, editor of 'The Stock Trader's Almanac', mentioned that under the Trump administration, the stock market tended to bottom out in March and April and then continue to rally until the end of the year.

This week, there are no earnings announcements scheduled for companies that the market is particularly focused on. Six of the so-called 'Magnificent 7', excluding Nvidia, have already announced their Q1 earnings.

This week, earnings announcements are scheduled for Palantir and AMD, among the still-hot artificial intelligence (AI) and semiconductor-related stocks.

◇Key Schedule and Speeches

- May 4

March Factory Orders

Speech by John Williams, President of the Federal Reserve Bank of New York (FRBNY)

Company Earnings: Palantir

- May 5

March Trade Balance and Imports/Exports

April S&P Global Services PMI

April Institute for Supply Management (ISM) Services PMI

March New Home Sales

March JOLTS (Job Openings and Labor Turnover Survey)

Company Earnings: AMD

- May 6

April ADP Non-Farm Employment Change

Speech by Austan Goolsbee, President of the Federal Reserve Bank of Chicago

- May 7

April Challenger, Gray & Christmas (CG&C) Layoff Report

Weekly Initial Jobless Claims

Q1 Non-Farm Productivity and Unit Labor Costs

Speech by Beth Hammack, President of the Federal Reserve Bank of Cleveland

Speech by John Williams, President of the Federal Reserve Bank of New York

- May 8

April Non-Farm Employment Index and Unemployment Rate

May University of Michigan Consumer Sentiment Index and Inflation Expectations

March Wholesale Inventories