[Weekly Outlook - New York Stock Market] Iran's Agonizing Choice... Non-farm Employment Also 'Under Scrutiny'

This week, the New York stock market is expected to focus on whether peace talks between the United States and Iran will progress, and on the health of the job market.

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Strait of Hormuz

Late last week, Iran presented a new peace negotiation proposal to the United States through mediator Pakistan. Some media outlets reported that this proposal also included a plan to discuss nuclear negotiations.

Previously, Iran had proposed to the United States that both countries first agree to an end to the war, then fully open the Strait of Hormuz, and then begin nuclear negotiations. However, with U.S. President Donald Trump rejecting that proposal, Iran presented a new one.

While the United States has received the new negotiation proposal, whether it will agree to it remains uncertain. U.S. President Donald Trump has repeatedly stated that the blockade of Iranian waters by the U.S. military has been significantly effective, and that he will continue the war of attrition until Iran makes a satisfactory offer.

On the 1st, Trump said, "We will properly finish this (war with Iran)," adding, "We will not withdraw early from Iran and let the problem recur in three years."

Since the outbreak of this war, Iran's economic difficulties have deepened with soaring inflation and the exchange rate against the dollar. The value of the Iranian rial, the country's legal tender, plummeted by about 15% just last week, and prices have surged approximately sevenfold compared to the same period last year. This rapid deterioration began in earnest after the U.S. military blockade of Iranian seas.

The more impatient Iran becomes, the greater the possibility that it will engage more actively in negotiations. This means that the two countries could quickly resume a second round of peace talks.

On the other hand, the U.S. April non-farm employment figures are a major variable. If employment indicators show a robust trend, concerns about stagflation (economic recession amidst high inflation) are expected to ease despite surging inflation.

According to estimates by financial information provider FactSet, new non-farm employment in April is expected to be only 50,000. This is significantly lower than the market's expectation of 178,000 last month. The unemployment rate is projected to stabilize at 4.3%.

Bob Lang, Chief Options Analyst at Explosive Options, stated that strong employment figures could be welcome news for the stock market but would not significantly impact interest rate prospects. He explained, "The recent Federal Open Market Committee (FOMC) meeting revealed a lack of support for an easing bias, which means the likelihood of an interest rate cut in the near future has decreased."

According to the CME FedWatch Tool, the federal funds rate futures market is pricing in a 77.7% probability that the benchmark interest rate will be frozen until the end of December this year. The probability of a 25bp rate hike is 9.1%, and the probability of a 25bp rate cut is 12.3%.

If inflation does not surge further from here, there is a high probability that the freeze in interest rates will be maintained. This means that the interest rate path will not be a variable for the stock market this year.

As May begins, the stock market adage 'Sell in May and go away' is also regaining attention.

According to an analysis by J.P. Morgan's trading desk, the S&P 500 index rose by an average of 1.5% in May over the past decade. It recorded average gains of 1.9% in June and 3.4% in July.

Voices mixed with anticipation suggest that this time could be different. Jeff Hirsch, editor of the 'Stock Trader's Almanac,' noted that under the Trump administration, the stock market tended to bottom out in March and April before continuing a rally until the end of the year.

This week, no earnings reports from companies closely watched by the market are scheduled. Six companies among the so-called 'Magnificent Seven,' excluding Nvidia, have already announced their Q1 earnings.

This week, earnings reports are scheduled for Palantir and AMD, among the still-hot artificial intelligence (AI) and semiconductor-related stocks.

◇Key Schedule and Speeches

- May 4

March Factory Orders

Speech by John Williams, President of the Federal Reserve Bank of New York

Company Earnings: Palantir

- May 5

March Trade Balance, Imports/Exports

April S&P Global Services PMI

April Institute for Supply Management (ISM) Services PMI

March New Home Sales

March JOLTS (Job Openings and Labor Turnover Survey)

Company Earnings: AMD

- May 6

April ADP Non-farm Employment Change

Speech by Austan Goolsbee, President of the Federal Reserve Bank of Chicago

- May 7

April Challenger, Gray & Christmas (CG&C) Layoff Report

Weekly Initial Jobless Claims

Q1 Non-farm Productivity and Unit Labor Costs

Speech by Beth Hammack, President of the Federal Reserve Bank of Cleveland

Speech by John Williams, President of the Federal Reserve Bank of New York

- May 8

April Non-farm Employment Index and Unemployment Rate

May University of Michigan Consumer Sentiment Index and Inflation Expectations

March Wholesale Inventories