We Could Be in for a Rather Volatile Week

Following last week's positive move in the market that saw the major market indexes rebound 1.6%-2.2%, we have what looks to be a mixed start to this week based on US equity future so far this morning. We'd note that mixed picture even though the yield on the 10-year Treasury has moved lower this morning, and as we discussed in Friday's Roundup, that was a key driver behind the market's move last week.

With China's issuing a smaller-than-expected 2023 GDP growth target of "around 5%" vs. chatter for 5.5%-6.0% last week, we could see some air let out of stocks this morning. Should we see the portfolio's shares of Coty (COTY) sag in a big way on this news, we would be inclined to use that to build out our position in COTY shares.

Other details announced during China's National People's Congress over the weekend include China's defense spending will rise 7.2%, news that could curtail efforts to trim back defense spending here at home. We see that as a positive for our position in Lockheed Martin (LMT) shares.

Turning to the week ahead, it will be a big week focused on the Fed as well as February job creation and wage inflation. With the bulk of that jobs data coming after Fed Chair Powell kicks off his semi-annual testimony in Washington, a two-day event that begins tomorrow, we could be in for a rather volatile week should the market have to re-set its interest rate expectations.

Given the string of inflation data that has been indicating inflation stickiness, the market will be hanging on Powell's words, attempting to de-code if the Fed will boost interest rates by 25 or 50 basis points at its March meeting. It will also be trying to determine what the Fed may see as its terminal level of the fed funds rate.

Wednesday brings the ADP Employment Change Report for February, and we expect attention will be paid to the volume of jobs it shows were created during the month. Inside that latest edition of the report, we'll also be sizing up wage data vs. reports over the last few months, looking to see if wage data is cooling or like other inflation data, remaining stickier than expected.

Wednesday also brings the January JOLTs report and the next iteration of the Fed Beige Book. We, along with most others we know, will be pouring over that anecdotal collection of comments to see what the Fed heads will be thinking about at their upcoming monetary policy meeting.

Rounding out the week's jobs data, we have the latest Challenger Job Cuts Report on Thursday and then the February Employment Report. In that, the focus will be on the number of jobs created during February vs. January and December, any movement in the Unemployment Rate, and of course, the wage data to see if wage inflation pressure has cooled... or not.

Given the timing after Fed Chair Powell's testimony, the Thursday and Friday data could reshape investor expectations for monetary policy.

With the February Consumer Price Index and Producer Price Index not due until the first half of next week, odds are the stock market will once again trade based on what it sees and hears last. With that in mind, as we move through the week, we will be mindful of moves in the dollar, 10-year Treasury yields, and fed funds expectations measured by the CME FedWatch Tool. What they show will likely indicate how stocks will trade as the coming days unfold.

We would also note we are seeing the Cboe Volatility Index (VIX) edge up this morning after closing last week at 18.49, one of its lowest levels in some time. As we indicated in last week's Roundup, we'll have a closer look at the relationship between the S&P 500 and the VIX later this morning.

Calendar Items for This Week

- We will hold our March AAP Members Only call on Wednesday, March 8 at noon ET. You can access the call live here at the AAP home page, and we of course will publish the replay and transcript later that day for those that miss the live broadcast.

- Apple (AAPL) will hold its annual meeting on Thursday, March 9. While it is typically a non-event, we expect Wall Street will be looking for any update on the company's business as well as plans to increase the size of its quarterly dividend to shareholders. Ahead of that event, citing potential upside in its services business, this morning Goldman Sachs initiated coverage on AAPL shares with a Buy rating and a $199 target.

- With an eye toward the portfolio's position in shares of the Energy Select SPDR Fund (XLE) , we will be parsing comments emanating from energy conference CERAWeek that runs from March 6-10. Speakers from Occidental Petroleum (OXY) , Shell (SHEL) , BP (BP) , Exxon Mobil (XOM) , ConocoPhillips (COP) , and Plug Power (PLUG) CEO Andy Marsh will be on hand. Given Shell's recent move into the EV charging space via its acquisition of Volta (VLTA) , we'll be listening to see what the others may say about entering this market and if so, how they intend to do so.

- We also have a slew of investor conferences this week, including the Morgan Stanley Technology, Media & Telecom Conference, Oppenheimer 33rd Annual Healthcare Conference, the Bank of America Consumer & Retail Conference, Barclays Global Healthcare Conference, J.P. Morgan's Industrials Conference, William Blair 7th Annual Tech Innovators Conference, Citi Global Consumer Conference, and UBS Global Consumer and Retail Conference.

With February PMI data in hand and 20 trading days until we close the current quarter, as companies present at these and other conferences, readers should be listening for guidance updates as well as any discernable change in tone when discussing their business or outlook.

Action Alerts PLUS is Long COTY, LMT, AAPL, XLE.