Stocks could be shaky in the week ahead as sigh-of-relief rally runs its course

Published Fri, Mar 31 20233:09 PM EDT

The stock market is about to enter one of the seasonally strongest months of the year, but volatility could persist in the week ahead with fading momentum and a big jobs report. The S & P 500 is set to end the wild first quarter on a high note as an inflation gauge showed cooling prices , triggering a rally on Friday. Heading into a new month, many are hopeful that April will live up to its great track record for equity investors — it has been the second strongest month for the S & P 500 and the top month for the Dow Jones Industrial Average since 1950, according to the Stock Trader's Almanac . However, market experts warned that the recent rally might not have legs as the ramifications of the banking crisis are not fully realized, while the Federal Reserve is still steadfast in its rate-hiking campaign. "I think this may roll over next week," Art Cashin, director of floor operations for UBS Financial Services, said on CNBC's " Squawk on the Street " Thursday. "I think what we see here is a bit of a sigh-of-relief rally," he said, adding the market is "a little bit Alice in Wonderland." "Now it's hard to say that because we're going into the month of April, which is one of the seasonally strongest months of the year," Cashin said. "I think we've got probably a 20 to 25% chance of going back and retesting the October lows. And I think we may have a down week or two in April." .SPX YTD mountain S & P 500 Widely followed Mike Wilson of Morgan Stanley believes corporate earnings present a threat to stock prices, saying investors are still too optimistic and a severe deterioration is about to weigh on the market. Cashin also said he's skeptical of the upcoming earnings season. Meanwhile, DoubleLine Capital CEO Jeffrey Gundlach recently pointed to the Treasury yield curve, which is rapidly becoming less inverted, and indicative of an imminent recession. The big test on the horizon is March jobs report, which is set for release Friday morning. The stock market is closed that day to observe Good Friday. The labor market has been resilient despite the Fed's aggressive efforts to cool it down, and Fed officials have partly blamed wages as a factor that has kept inflation sticky. "Even with layoff announcements streaming across headlines, the U.S. labor market is powering ahead," said Daniel Berkowitz, investment director at Prudent Management Associates. "This isn't great news for the Fed, which is likely hoping to see slightly larger cracks emerge in the labor market." Economists polled by Dow Jones estimate that the economy added 235,000 jobs in March. Nonfarm payrolls rose by 311,000 in the previous month , above the Dow Jones estimate of 225,000 and a sign that the employment market was still hot. Week ahead calendar Monday 10:00 a.m. Construction Spending, Feb. 10:00 a.m. ISM Manufacturing, March Tuesday 10:00 a.m. Factory Orders, Feb. 10:00 a.m. JOLTS, Feb. Wednesday 7:00 a.m. Mortgage Applications 8:15 a.m. ADP, March 8:30 a.m. Trade Balance, Feb. 10:00 a.m. ISM Service, March Thursday Earnings: Constellation Brands 8:30 a.m. Initial claims Friday The stock market is closed for Good Friday 8:30 a.m. Nonfarm Payrolls