Week ahead: Market jitters set to continue as US protectionism remains a concern

Trump's decision to continue pushing a protectionist agenda has led to uncertainty in the market. Photo/File.

As Wall Street struggles to extend its advance amid the latest quarterly earnings season, investors will eye trade talks from an increasingly protectionist US as well as a policy meeting at the Bank of England.

"Protectionism will remain in focus, with trade negotiators coming back from China empty-handed and discussions on the future of NAFTA still ongoing," Capital Economics said in a note on Friday.

US companies set to report their latest earnings in the coming days include Tyson Foods, Sysco, Walt Disney, Twenty-First Century Fox and Nvidia.

"While the results are rather impressive with respect to both top and bottom line results in terms of percent of companies beating expectations, shares are not feeling much love," Lenore Hawkins, chief macro strategist at Tematica Research, said in a note on Friday.

"We are seeing lower bullish highs on the weeks that sentiment improves followed by weeks with even bigger declines," according to Hawkins. "Investors are increasingly concerned that this is the best it is going to be, particularly when we see the economic data is failing to show accelerating growth as the prevailing narrative assured us we'd see post the tax cuts."

For the week, both the Dow Jones Industrial Average and the Standard & Poor's 500 Index fell 0.2 percent. The Nasdaq Composite Index posted a 1.3 percent gain.

On Friday, the Dow rallied 1.4 percent, the S&P 500 climbed 1.3 percent, while the Nasdaq jumped 1.7 percent.

Shares of Apple advanced 3.9 percent to record high on Friday, leading gains in the Dow, after Warren Buffett told CNBC that Berkshire Hathaway had boosted its stake in the company, buying 75 million more shares in the iPhone maker in the first quarter.

"If you look at Apple, I think it earns almost twice as much as the second most profitable company in the United States," Buffett told CNBC. Berkshire now holds about 240 million Apple shares.

Shares of Buffett's Berkshire Hathaway closed 2.1 percent higher.

It is "not surprising to see Buffett take a big position" in the company, Daniel Morgan, a portfolio manager at Synovus Trust Company, which holds 270,415 shares in Apple, told Reuters. "He is an old 'Graham and Dodd' value investor."

For fresh clues about the potential for an acceleration in US interest rate increases, investors will eye this week's speeches by Federal Reserve officials. They include Tom Barkin, Robert Kaplan, and Charles Evans today, Raphael Bostic on Wednesday, and James Bullard on Friday.

Fed chair Jerome Powell will speak on Tuesday, on a panel at a conference in Zurich.

A report on the consumer price index, due Thursday, will also be closely watched.

"Our on-consensus forecasts are consistent with an outlook of rising but contained price pressures," according to TD Securities in a note on Friday, predicting a 2.5 percent gain in May.

Fed policy makers last week signalled they remain on track for a total of three interest rate hikes this year, easing some concern that rising inflation would accelerate that pace.

And last Friday a Labour Department report showed US nonfarm payrolls rose by 164,000 jobs in April, while the unemployment rate fell to 3.9 percent. Meanwhile, average hourly earnings increased 0.1 percent last month.

"Fed officials can rest easy that there is not any wage-based inflation on the horizon," Chris Rupkey, chief economist at MUFG in New York, told Reuters. "There is no need to speed up the path of interest rates because inflation isn't heating up in a worrisome manner."

Other US economic data slated for release this week include reports on consumer credit today, NFIB small business optimism index, and JOLTS, due Tuesday; producer price index, and wholesale trade, due Wednesday; weekly jobless claims, due Thursday; as well as import and export prices, and consumer sentiment, due Friday.

US Treasuries inched higher on Friday, sending the yield on the 10-year note one basis point lower to 2.94 percent.

In Europe, the Stoxx 600 Index ended Friday with a 0.6 percent increase from the previous day's close.

The Bank of England's policy meeting on Thursday is in focus amid expectations it will keep its key rate unchanged for now.

"We expect the BoE to remain on hold at its May meeting, with the next hike taking place in August, in our view," according to Citigroup. "If the BoE fails to hike rates by then, we would expect the next rate hike not to occur before spring 2019, as Brexit negotiations enter their last stretch."