The stock market is on a roller coaster ride as tech earnings have sparked a rally, but fears of the Fed holding interest rates higher for longer are looming. Last week, the Nasdaq Composite rose over 4%, the S&P 500 popped almost 3%, and the Dow Jones Industrial Average rose less than 1%.
In the upcoming week, all eyes will be on the Fed meeting, the April jobs report, and earnings reports from Big Tech giants like Apple and Amazon. Additionally, updates on job openings, manufacturing and service sector activities, and consumer confidence will also be closely watched.
The Fed is expected to maintain its interest rate policy in the upcoming meeting, but investors will be listening keenly to see how the central bank is interpreting recent inflation data. The market has scaled back its rate cut expectations following elevated inflation data, and the Fed may adopt a more hawkish tone if inflation continues to rise.
The labor market remains a focal point as economists hope for continued strength in job numbers despite higher interest rates. The April jobs report is expected to show an addition of 250,000 nonfarm payroll jobs, with the unemployment rate steady at 3.8%.
Big Tech earnings have been a mixed bag so far, with Meta facing a stock decline after a soft revenue outlook, while Alphabet saw a surge following impressive earnings results. This trend will be put to the test as Apple and Amazon report their earnings this week.
Overall, the S&P 500 is tracking for a modest earnings growth of 3.5%, slightly above initial estimates. Companies that beat earnings expectations are seeing muted stock reactions, indicating that investors are looking for more than just beating estimates. Profit margins are on the rise, which has been a silver lining in the earnings reports.
In the coming days, economic indicators such as manufacturing data, labor market updates, and service sector activities will play a crucial role in guiding market sentiment. Stay tuned as the market continues to navigate through the current economic landscape.