Fed Chair Powell speaks, stock rally, earnings: What to watch in markets this week

Yahoo Finance's Alexandra Semenova breaks down what to know in markets this week as Fed Chair Powell is expected to speak in an interview, earnings continue to pour in, and investors focus on whether the recent rally in stocks will hold up.

Video transcript

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BRIAN SOZZI: Fed Chair Jerome Powell gears up to speak at the Economic Club of Washington tomorrow. Investors very keen on what Powell will have to say after January's blowout jobs report. Here on what we might hear from Jerome Powell is Yahoo Finance's Alexandra Semenova. Alexandra.

ALEXANDRA SEMENOVA: Well, guys, this week is all about Jay Powell. We have a lean economic calendar. We have a medley of earnings from companies, like Walt Disney, Pepsi, Uber, PayPal, and some others. But for markets, it's all about what Powell says tomorrow at the Economic Club of Washington DC where he's scheduled to speak around noon.

Bank of America's Michael Gapen put it well in a note last week. He said, "The key question for markets is whether Powell's dovish after that FOMC meeting last week was intentional or accidental." We did get the Fed saying that more rate hikes are ahead. But investors seem to eat up Powell suggesting that we have disinflation in the economy. It was risk on immediately after that speech. And it's not actually clear whether he meant to sound as dovish as he did.

Tomorrow will really be an opportunity for him to reassert his hawkishness, reassert his position that the Fed is still gonna keep hiking. It's going to keep rates higher for longer. He's going to be interviewed by the Carlyle Group's David Rubenstein. It should be a really interesting conversation. And you better believe that speech is going to be under a lot of scrutiny. Investors will be listening to every word he says, listening to his tone.

JULIE HYMAN: Yeah, most definitely. And trying to figure out if they should still keep buying stocks, as we have seen happening thus far this year. A lot of strategists commentary out about whether the rally is gonna keep going, right?

ALEXANDRA SEMENOVA: Exactly. We've been on an uptrend to start 2023. Investors are betting that the Fed will pause and even cut rates this year, as they see inflation come down from highs, as they see some slowdowns in housing and manufacturing. But there's a lot of indication that this rally is premature.

We had that jobs report last week-- 517,000 payrolls, keeping the upside risk to inflation high. Yes, it's off of its peak of the cycle at 9%, but it's still 6%. You know, inflation is still persistent. There's still the possibility of a recession. There's not much ground to this rally.

I was in Miami last week for the Global Alts Conference. And the panelists did not share the optimism around stocks that we're seeing in the market. Mike Wilson, on the stage, said that this was purely the January effect taking place. That we're gonna see the S&P 500 go down to about 3,200.

And then legendary short-seller Jim Chanos made a really interesting point. He said that once you see meme stocks rally-- he called it "the garbage." His words, not mine-- that's usually an indication of the end of the rally, not the beginning. And we're seeing that right now, Carvana up 200%, Peloton up 90%, the ARKK Innovation having its best month since 2020. So not much ground for this rally.

BRIAN SOZZI: Abnormal moves indeed. Alexandra Semenova, appreciate it.