In the week ahead, oil, inflation, and interest rates could serve as indicators for stock performance.

• In the upcoming week, stocks may face challenges due to increasing interest rates and high oil prices, but strategists believe there is a possibility of a positive market outlook in the short term.
• The March employment report and key inflation data, both of which are crucial for the economy, will be released on Friday.
• Developments in the war in Ukraine could continue to add volatility.

The market is expected to be influenced by the release of March's employment report, as well as news about Ukraine, the price of oil, and an inflation report in the upcoming week.

While stocks gained for the week, interest rates surged and oil prices soared. The energy sector was the top performer, up over 7%, with West Texas Intermediate crude futures finishing nearly 9% higher. Additionally, the closely monitored yield increased to 2.5% on Friday, its highest level since May 2019, from 2.14% just a week prior.

Traders are closely monitoring the increase in interest rates to determine if it will hinder the market's growth. The S&P 500 rose by approximately 1.8% during the week, closing at 4,543.06 on Friday.

Art Hogan, chief market strategist at National Securities, stated that the S&P 500 had increased by at least 1% in the ten days since the war began. He predicted that the trend would continue in the upcoming week, with the market being driven by headlines such as economic data, news from Ukraine, and crude oil futures.

Despite market fluctuations, the S&P has risen by nearly 3.9% for the month of March so far.

Fairlead Strategies founder Katie Stockton stated that stock charts show potential in the short term but are uncertain in the long term.

We should seize this temporary surge. I am optimistic about it in the short term. I mean, several weeks. Additionally, we have observed some impressive short-term gains, with names surpassing their 50-day moving averages.

The S&P 500 companies are experiencing positive momentum as 58% of them are now above their 50-day moving averages. The 50-day moving average represents the average closing price over the past 50 sessions, and a move above it can indicate further upside.

Some high-growth tech names, including and , have regained their 50-day moving averages, according to Stockton. She also mentioned the ETF as an example.

She stated that the 10-year yield is set to consolidate after it reached 2.50%. Her next objective is 2.55%. If the yield surpasses 2.55%, the next challenge is 3.25%.

Jobs and inflation

In the upcoming week, the economic calendar is packed with significant events, including the release of the March jobs report and personal consumption expenditures data.

Consumer confidence and home price data will be released Tuesday.

The Fed closely monitors an inflation measure contained in PCE, and economists anticipate a 5.5% year-over-year increase in core PCE inflation when it is released on Thursday, as reported by Dow Jones.

On Friday, both the ISM manufacturing survey and the key nonfarm payrolls report will be released.

In March, economists predict that 460,000 jobs were added and the unemployment rate decreased to 3.7%, according to Dow Jones. This is in comparison to the 678,000 nonfarm payrolls added in February and an unemployment rate of 3.8%.

Ben Jeffery, vice president of U.S. rates strategy at BMO, stated that while employment data is still important, the Federal Reserve is now prioritizing the fight against inflation as the economy reaches full employment.

When speaking to economists on Monday, Fed Chair Jerome Powell stated that the central bank would consider being more aggressive in raising interest rates to combat inflation. This led to initial stock market declines, as investors worried that the Fed might slow down the economy or cause a recession.

Although stocks rose after that, interest rates have been climbing rapidly. The fed funds futures market has predicted 50-basis-point rate hikes, or 0.5%, for both May and June.

Jeffery stated that nonfarm payrolls will play a role in determining the market's response to the 50-basis-point rate hike narrative, which is likely to be more pressing next week. He also noted that the excitement surrounding jobs has decreased at this stage of the cycle.

On Monday and Tuesday, investors will closely monitor Treasury auctions as the government releases $151 billion in securities.

The bond market and the stock market are closely monitoring the rise in oil prices, which has led to higher inflation expectations. Oil prices settled up 8.8% for the week, at $113.90 per barrel on Friday.

Oil heats up

Jeffery from BMO stated that oil above $100 appears to have some endurance.

The relationship between stocks and oil will remain significant, as observed by Michael Arone, the chief investment strategist at State Street Global Advisors. When oil prices increase, stocks tend to decline, while when crude oil falls, stocks tend to rise.

Arone stated that this week, the rise in oil prices was more pronounced, and it is connected to several factors, including sentiment about the Ukraine conflict, inflation, and the Fed's hawkish or dovish stance. He believes that oil prices have become a binary proxy for these other elements in the market.

He stated that it is merely an indicator of other issues, including the Ukraine conflict, inflation, and the Fed.

As investors anticipate a resolution to the conflict in Ukraine, but the timeline remains unclear, Arone stated that the headlines emerging from Ukraine will continue to cause volatility. However, he added that at the margin, investors are gaining comfort with the likely outcome.

Arone stated that the stock market's fundamentals are stronger than some investors anticipate. As inflation increases, so can top-line revenues.

While it is widely known that multiples have contracted and stocks have become cheaper, investors often overlook the correlation between top-line revenues and inflation. However, corporate profits and the consumer price index are closely linked. Despite the contraction of multiples, earnings estimates are increasing.

Arone stated that stocks are appropriately positioned and investors are becoming increasingly confident that there will be a positive outcome to the conflict.

"Despite concerns about the Ukraine conflict and the Fed, as well as inflation, I believe the fundamentals are sound," he stated.

Week ahead calendar

Monday

8:30 a.m. Advance economic indicators

Tuesday

9:00 a.m. S&P/Case-Shiller home prices

9:00 a.m. FHFA home prices

9:00 a.m. New York Fed President John Williams

9:30 a.m. Atlanta Fed President Raphael Bostic

10:00 a.m. Consumer confidence

10:00 a.m. JOLTS

10:30 a.m. Philadelphia Fed President Patrick Harker

Wednesday

8:15 a.m. ADP employment

8:30 a.m. Real GDP

9:15 a.m. Richmond Fed President Tom Barkin

1:00 p.m. Kansas City Fed President Esther George

Thursday

8:30 a.m. Initial claims

8:30 a.m. Personal income

8:30 a.m. PCE deflator

9:00 a.m. New York Fed’s Williams

9:45 a.m. Chicago PMI

Friday

Monthly vehicle sales

8:30 a.m. Employment

9:05 a.m. Chicago Fed President Charles Evans

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM manufacturing

10:00 a.m. Construction spending