Wall St readies for Yellen testimony

Trader Thomas Ferrigno, left, works on the floor of the New York Stock Exchange. File photo / AP

Investors will eye US Federal Reserve Chair Janet Yellen's testimony to Congress this week in the wake of unexpectedly strong jobs growth last month and monitor the latest earnings from companies including Pfizer and Walt Disney.

On Wednesday Yellen is scheduled to talk about the economic outlook before the Joint Economic Committee in Washington. She'll meet with the Senate Budget Committee the following day.

Other policy makers scheduled to speak in the coming days are Philadelphia Fed Bank President Charles Plosser in New York, Fed Governor Daniel Tarullo at the Chicago Fed's banking conference, and St Louis Fed President James Bullard in St Louis, all on Thursday. The next day, Minneapolis Fed President Narayana Kocherlakota is scheduled to talk in St Paul, Minnesota.

Investors will be waiting to see whether a consensus is emerging about the timing of a rate hike if the economy continues to gather momentum.

To help assess the state of the world's biggest economy, there will be PMI services and ISM non-manufacturing indices, due today; international trade, due Tuesday; productivity and costs, and consumer credit, due Wednesday; weekly jobless claims, due Thursday; and wholesale trade, due Friday.

Last Friday, a Labor Department report showed American employers added a much higher-than-expected 288,000 workers in April, up from an upwardly revised 203,000 gain in March. While the unemployment rate fell to 6.3 per cent, the lowest since September 2008, the drop was in large part due to an increase in the number of people who stopped looking for work.

"This is the first strong confirmation we're unwinding some of the winter weakness," Anthony Valeri, a market strategist with LPL Financial in San Diego, told Bloomberg News.

Last Wednesday, the Federal Open Market Committee said it would cut its monthly bond-buying program by another US$10 billion, lowering it to US$45 billion, and assured investors the central bank will keep interest rates near record lows until the economy is on a more assured growth path.

Concern about the escalating tension in Ukraine weighed on Wall Street last Friday, and the benchmark indices closed lower. War has essentially broken out in eastern Ukraine, and Russian troops seem ever closer to entering the fray with greater force.

"Geopolitical tension has come back into the market," Quincy Krosby, market strategist at Prudential Financial, in Newark, New Jersey, told Reuters.

For the week, however, the Dow Jones Industrial Average climbed 0.93 per cent, the Standard & Poor's 500 index rose 0.95 per cent, while the Nasdaq Composite index added 1.19 per cent. The Dow also earned a fresh closing record last week.

Corporate earnings will also remain in focus with Pfizer, Walt Disney, Whole Foods, and Groupon among companies to report in the coming days.

For Pfizer, the focus might not be on its latest earnings though. The company has been pursuing a takeover of AstraZeneca but the UK company on Friday said it rejected Pfizer's latest bid, worth about 63 billion pounds. Shares of Pfizer closed 1.3 per cent lower on Friday.

So far this US earnings season, 75 per cent of companies have surpassed earnings expectations, while 51 per cent have exceeded sales expectations, according to Thomson Reuters data.

Shares of LinkedIn sank on Friday, losing 8.4 per cent, after the company fell short in its revenue outlook.

In Europe, the Stoxx 600 rose 1.3 per cent last week, while Germany's DAX climbed 2.1 per cent.

Policy makers of the European Central Bank are set to gather this week. Economists expect the ECB to keep its benchmark interest rate at a record low 0.25 per cent. President Mario Draghi's post-meeting press conference on May 8 will be closely monitored to gauge policy makers' take on the region's inflation rate which has been below target.

On Thursday policy makers at the Bank of England are expected to maintain the bank's current course of a record low benchmark rate and its asset purchases target.