Stocks rebounded as earnings from tech companies helped lift the market even as concerns grew that the Federal Reserve would keep interest rates high for an extended period of time.
Last week, the Nasdaq Composite Index (^IXIC) rose more than 4% and the S&P 500 (^GSPC) rose almost 3%. Meanwhile, the Dow Jones Industrial Average (^DJI) rose less than 1%.
Over the coming week, the Fed’s meeting, April jobs report, and earnings results from Big Tech giants Apple (AAPL) and Amazon (AMZN) will test the market’s recent optimism.
There will also be updates on job postings, service and manufacturing sector activity, and consumer confidence.
Companies reporting earnings include AMD (AMD), Coca-Cola (KO), Eli Lilly (LLY), McDonald’s (MCD), Novo Nordisk (NVO), Starbucks (SBUX), and Super Micro Computer ( SMCI).
Latest information from the Fed
The latest decision on interest rate policy by the Federal Open Market Committee is likely on Wednesday, followed by a media briefing by Fed Chairman Jerome Powell. Markets widely expect the central bank to keep interest rates unchanged.
Investors are watching how the Fed interprets recent stronger-than-expected inflation data as markets dial back expectations for rate cuts.
read more: Impact of Fed interest rate decisions on bank accounts, CDs, loans, and credit cards
“Another uptick in inflation data will likely result in a more hawkish message at the FOMC meeting in May,” Matthew Ruzzetti, chief U.S. economist at Deutsche Bank, said in a research note on Friday. Ta. “While we expect the committee to maintain its accommodative bias, Chairman Powell’s view that the statement and press conference suggest that the continued trend in inflation suggests it will take time to gain confidence that inflation will be resolved. I expect it to reflect that.”
Since Chairman Jerome Powell publicly said on April 16 that inflation was “taking longer than expected” to fall to the Fed’s 2% target, data on price increases have exceeded expectations. Exceeds. Most recently, the core personal consumption expenditures (PCE) index, which excludes food and energy costs, which is closely monitored by the Federal Reserve, rose 2.8% year over year in March, down from the expected 2.7%. There was no change from the previous year. Annual increase seen in February.
After the report, investors are pricing in just a 33% chance that the Fed will cut interest rates in July, down from 83% chance a month ago, according to the CME FedWatch tool.
Labor market overview
The health of the labor market remains in the spotlight, as the Fed has vowed to keep raising interest rates until it is confident that inflation is coming down. Given the strong economic data, economists are hopeful that a rising interest rate environment could allow inflation to fall to 2% without pushing the economy into recession.
The April jobs report is expected to show the U.S. economy added 250,000 nonfarm payrolls and the unemployment rate held steady at 3.8%, according to Bloomberg data. In March, the US economy added 303,000 jobs and the unemployment rate fell to 3.8%.
And many economists don’t expect to see any signs of cracks in the strong labor market story.
“We do not expect recent momentum in the labor market to slow,” BofA U.S. economist Michael Geipen said in a weekly note to clients on Friday.
Big Tech profits continue
Market reaction to Big Tech’s earnings has been mixed so far. Meta Inc.’s (META) plans to spend heavily on artificial intelligence and a weaker-than-expected second-quarter earnings outlook gave investors pause. The social media giant’s stock price fell more than 10% following the earnings release.
Alphabet (GOOG, GOOGL) proved to be the winner this week. The company’s stock soared more than 10% after the company announced his $0.20 per share cash dividend program, approval of a $70 billion stock repurchase program, and better-than-expected earnings results. . . On Friday, its market capitalization exceeded $2 trillion.
Ted Mortenson, sector strategist on Baird’s Technology Desk, theorized that the main reason the two Big Tech stocks are moving differently is a “game of positioning.” While Meta stock has soared over the past year, Alphabet hasn’t outperformed by much.
That saga will be put to the test again this week when Apple and Amazon are scheduled to report earnings. Apple’s stock price has fallen more than 11% this year, the report said, amid growing concerns about slowing demand. Amazon, on the other hand, is up more than 18% this year and hovers near all-time highs.
revenue scorecard
Beyond Big Tech, this week concludes the S&P 500’s busiest two weeks of reporting. With 46% of the index already reporting for the quarter, the index is targeting earnings per share growth of just above his 3.5% and his 3.2%. % expected before the start of earnings season, according to FactSet.
Overall, the performance of companies that outperform in terms of earnings per share and sales has slowed. On the other hand, companies that fail may have worse-than-normal stock price performance.
Strategists told Yahoo Finance that after the big market rally at the start of the year, companies appear to be struggling to impress investors and prompt a strong stock price reaction.
“We don’t just need beats.” [on earnings and revenue estimates] and hold [on guidance]we need beats and raises and confidence in the long-term trajectory of these companies,” Citi strategist Drew Pettit told Yahoo Finance.
Still, there are positive signs in past earnings reports, with profit margins rising. The S&P 500 index’s net return for the quarter was 11.5%, higher than last quarter’s 11.2% and in line with the year-ago period’s return.
As Truist co-CIO Keith Lerner noted on Yahoo Finance Chartbook in January, the key question for investors in 2024 will be whether companies can maintain margins amid persistent inflation and high interest rates. Please. For now, the answer appears to be yes.
economic calendar
Monday
Revenue: Avis Budget Group (CAR), Chegg (CHGG), Domino’s Pizza (DPZ), Logitech (LOGI), Paramount (PARA), Philips (PHG), SoFi Technologies (SOFI)
Economic news: Dallas Fed manufacturing activity, April (forecast -11.3, previous -14.4)
Tuesday
Revenue: Amazon (AMZN), AMD (AMD), Caesars Entertainment (CZR), Coca-Cola (KO), Eli Lilly (LLY), McDonald’s (MCD), Oatly (OTLY), Pinterest (PINS), PayPal (PYPL), Riot Platform (RIOT), Super Microcomputer (SMCI), Cyrus XM (SIRI), Starbucks (SBUX), 3M (MMM)
Economic news: Conference Board Consumer Confidence, April (104.1 expected, 104.7 previously). First quarter employment cost index (expected +1%, previously +0.9%). S&P CoreLogic Case Shiller, 20 City Composite Home Price Index, m/m, February (expected +0.1%, previous +0.14%). S&P CoreLogic Case Shiller 20 City Composite Home Price Index, YoY, February (previously +6.59%)
Wednesday
Revenue: Carvana (CVNA), CVS (CVS), Devon Energy (DVN), Estée Lauder (EL), Etsy (ETSY), Kraft Heinz (KHC), Marriott International (MAR), Mastercard (MA), Norwegian Cruise Line ( NCL), Paycom (PAYC), Pfizer (PFE), Qualcomm (QCOM), Wingstop (WING)
Economic news: JOLTS job openings, March (8.72 million expected, 8.76 million last month). S&P Global U.S. Manufacturing PMI, finalized for April (49.9 expected, previous 49.9). ISM Manufacturing, April (expected 50.1, previous 50.3). ISM price paid in April (previously 55.8). Construction spending month-over-month, Mach (expected +0.3%, previous -0.3%): Federal Open Market Committee interest rate decision (no expected change)
Thursday
Revenue: Apple (AAPL), Block (SQ), Booking Holdings (BKNG), Coinbase (COIN), Cigna (CI), ConocoPhillips (COP), DraftKings (DKNG), Expedia (EXPE), Moderna (MRNA), Novo Nordisk (NVO), Peloton (PTON), Wayfair (W)
Economic news: Challenger employment reduction, YoY, April (previous +0.7%) Unit labor cost, first quarter (forecast +2%, previous +0.4%). Non-agricultural productivity, Q1 (expected +1.5%%, previously +3.2%). Number of new weekly unemployment claims (previously 217,00). Factory orders received in March (forecast +1.6%, previous +1.4%). Durable goods orders confirmed in March (previously 2.6%)
Friday
Revenue: fuboTV (FUBO), Hershey (HSY)
Economic news: Number of non-agricultural sector employees in April (forecast +250,000 people, previous +303,000 people). April unemployment rate (expected 3.8%, previous 3.8%). April average hourly wage, month-over-month (forecast +0.3%, previous +0.3%). April average hourly wage, year-on-year change (forecast +4%, previous +4.1%). Average weekly working hours in April (estimated to be 34.4 hours, previously 34.4 hours). Labor force participation rate, April (previously 62.7%) S&P Global US Services PMI, final value for April (expected 50.9, previous 50.9). ISM Services PMI, April (expected 52, previously 51.4)
