What do you know this week?

The stock market continues to set new highs.

The S&P 500 (^GSPC) and Nasdaq (^IXIC) both finished last week at all-time highs. The S&P 500 has now risen for 16 of the past 18 weeks for the first time since 1971, according to research by Deutsche Bank.

This week, Federal Reserve Chair Jerome Powell's testimony on Capitol Hill and the February jobs report will put the stock market's rally to the test. Updates on economic activity in the service sector and job opportunities are also provided schedule.

With most of the S&P 500 earnings reports wrapping up, Target (TGT), Costco (COST) and Kroger (KR) are three of the biggest consumer-facing brands reporting corporate results next week.

Feed feeding

Federal Reserve Chairman Jerome Powell is scheduled to testify semiannually on monetary policy before the House and Senate starting Wednesday. Investors will listen closely to Powell's updates on the overall health of the US economy, the fight against inflation, and when the central bank might start cutting interest rates.

Entering the week, Bloomberg data shows markets are pricing the Fed to cut interest rates three times this year starting in June as the decline in inflation slows. This is in line with the recent comment from Chair Powell and the latest forecasts from the Fed itself. The Federal Open Market Committee will announce its final policy decision and summary of economic forecasts on March 20.

Read more: What the Fed's interest rate decision means for bank accounts, CDs, loans and credit cards

U.S. Federal Reserve Chairman Jerome Powell holds a news conference after the Federal Open Market Committee meeting in Washington, D.C., on January 31, 2024. Powell noted on Wednesday that a rate cut as soon as March is unlikely, as the central bank continues data-based Thinking about his next steps. Powell said the Fed's rate-setting committee is planning for this — Federal Reserve Chairman Jerome Powell in a press conference after the Federal Open Market Committee meeting in January. (Julia Nickinson/AFP via Getty Images) (Julia Nishinson via Getty Images)

Labor market situation

With the inflation story recently hitting a snag as the Fed's favored measure saw its biggest monthly increase in a year, the Wall Street consensus now expects the central bank to be patient in cutting interest rates. Economists say that the key factor in this policy decision is that it will go smoothly, and that the economy that avoids a recession will be if the labor market remains flexible.

New jobs data due this week includes updates on wages and job opportunities. The headline will be the February jobs report scheduled for release Friday morning at 8:30 a.m. ET.

The report is expected to show that 190,000 non-farm jobs were added to the US economy last month, with unemployment rates rising. an average It remained steady at 3.7%, according to Bloomberg data. In January, the US economy shocked Wall Street by adding 353,000 jobs while the unemployment rate remained steady at 3.7% for the third month in a row.

Earnings update

Earnings season is coming to an end.

With 97% of the S&P 500 finished reporting fourth-quarter earnings, the S&P 500 is expected to post 4% earnings growth in the fourth quarter compared to the same period a year earlier, according to new FactSet data. This represents the second consecutive quarter of profit growth for the benchmark index.

It is worth noting that profit growth expectations in the current quarter are not deteriorating at their normal pace.

John Butters, senior earnings analyst at FactSet, noted that analysts typically reduce earnings estimates in the first two months of a quarter. Over the past 20 years, earnings have typically adjusted by an average of 2.9%. For the current quarter, these earnings estimates have been revised by just 2.2%.

History shows that stocks have more room to run

One of Wall Street's top expectations entering 2024 was a choppy first few months of trading before a late-year rally. Many expected that uncertainty about the path of the Fed's rate cuts and election fears would attract investors.

This did not happen. The S&P 500 and Nasdaq Composite had their best February performance since 2015 amid several strong earnings reports from big technology companies. This improved earnings outlook has prompted many Wall Street strategists to boost their year-end targets for the S&P 500.

History says that stocks continuing to rise is the most likely outcome. Research by Ryan Detrick of the Carson Group shows that the S&P 500 started the year positive in January and February 28 times since 1950. The benchmark average was positive over the following 12 months in 26 of those cases. On average, when the first two months were positive, the S&P 500 returned 19.9% for the year.

While Dietrich noted that this is not an accurate forecast for a return of nearly 20% this year, if the S&P 500 rose by the average amount, it would end 2024 at 5,719.

Weekly calendar

Monday

economic news: There are no noticeable economic versions.

Earnings: GetLab (GTLB), Stitch Fix (SFIX), ThredUp (TDUP)

Tuesday:

Economic data: S&P Global US Services PMI, February, final (51.4 expected, 51.3 previously); US S&P Global Composite PMI, final February (previously 51.4); ISM Services Index, February (52.9 expected, 53.4 previously); Durable Goods Orders, January (previously -6.1%)

Earnings: Box (BOX), ChargePoint Holdings (CHPT), Crowdstrike (CRWD), Nio (NIO), Nordstrom (JWN), Ross Stores (ROST), Target (TGT), Vivid Seats (SEAT).

Wednesday

Economic data: Federal Reserve Chairman Jerome Powell begins semiannual testimony on Capital Hill; MBA Mortgage Applications, Week Ending March 1 (-5.6%); ADP Private Sector Payrolls, February (+145,000 expected, +107,000 previously); Federal Reserve Beige Book for January

Earnings: Abercrombie & Fitch (ANF), Campbell (CPB), Foot Locker (FL), JD.Com (JD), Victoria's Secret (VSCO)

Thursday

Economic data: Challenger job cuts, year-over-year, in February (previously -20%); Unit Labor Costs, Q4 (+0.7% expected, +0.5% previously); Nonfarm Productivity, Q4 (+3.1% expected, +3.2% prior); Initial jobless claims, week ending March 2 (previously 215,000)

Earnings: American Eagle Outfitters (AEO), Big Lots (BIG), BJ's (BJ), Broadcom (AVGO), Burlington Stores (BURL), Costco (COST), DocuSign (DOCU), Gap (GPS), Kroger (KR), Marvell Technology (MRVL), MongoDB (MDB)

Friday

Economic calendar: Nonfarm Payrolls Report, February (+190,000 expected, +353,000 previously); Unemployment Rate, February (3.7% expected, 3.7% previously); Average hourly earnings, month over month, February (+0.2% expected, +0.6% previously); Average hourly earnings, year-over-year, February (+4.3% expected, +4.5% previously); Average weekly hours worked, February (34.3 expected, 34.1 previous); Labor force participation rate, February (previously 62.5%)

Earnings: There are no notable earnings releases.

Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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