The market rally is at its most fragile point in months, with the S&P 500 ending below 5,000 for the first time since late February. The Nasdaq Composite dropped over 5% last week, while the Dow remained flat. This week, critical readings on economic growth and inflation, as well as the start of Big Tech earnings, will determine if the malaise continues.
On the economic front, the advanced reading of first-quarter economic growth is set for Thursday, followed by the March reading of the Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, on Friday. Investors are closely watching these numbers to gauge the state of the economy and potential Fed actions.
In corporate news, a number of S&P 500 companies are expected to report quarterly results, including Meta, Microsoft, Alphabet, Tesla, and Chipotle. Earnings have been a mixed bag so far, with even better-than-expected results failing to impress investors.
The Fed’s preferred inflation gauge will also be a key focus this week, with economists expecting a slight slowdown in core PCE inflation. This reading could impact the Fed’s decision on interest rates in the coming months.
Big Tech earnings will also be in the spotlight, with companies like Meta, Microsoft, and Alphabet expected to report strong growth. Despite a recent sell-off in the tech sector, earnings expectations remain high for these companies.
Rising bond yields are another concern for investors, with the 2-year Treasury yield hitting 5% for the first time since October 2023. This could put pressure on stocks, particularly if the Fed delays rate cuts.
Overall, the market rally is facing challenges on multiple fronts, and investors will be closely watching economic data and earnings reports to determine the next direction for stocks.
