Last week, the S&P 500 and Nasdaq Composite both posted gains after consecutive weeks of losses. Strong earnings reports were the catalyst for these gains, with 77% of companies in the S&P 500 beating estimates. As a result, first quarter earnings are on pace to be up 3.5%. The forward 12-month P/E ratio in the S&P 500 has come down slightly, from 21 in March to 20 currently, which is closer to historical averages. Earnings season continues this week with big names like Amazon, Apple, and Starbucks reporting.
This week will see a heavy dose of economic data, with Wednesday’s Federal Reserve Open Market Committee (FOMC) meeting being a highlight. While it is expected that the Fed will leave interest rates unchanged, investors will be keen to hear what Jerome Powell has to say about future monetary policy. With strong economic data and earnings so far, a rate cut is unlikely and would likely be seen as a sign of a weakening economy. The jobs report this week is expected to show 210 thousand new jobs created and an unemployment rate of 3.8%.
Looking ahead, trading could be choppy as a result of the influx of data scheduled for this week. Market movements can be unpredictable, as seen last week, emphasizing the importance of keeping position sizes small and sticking to long-term investing objectives. While today’s trading might be quiet, Tesla and Baidu are two stocks moving after announcements over the weekend. Elon Musk’s visit to China resulted in positive news for Tesla, leading to a 10% rise in premarket trading for the company.
Overall, the market is in a positive state, with earnings season showing strength and economic data supporting a strong economy. While interest rate cuts were expected at the start of the year, the current inflation levels have made this possibility unlikely. Investors are encouraged by the strong results being produced and are looking forward to further earnings reports and economic data this week. The S&P 500 is expected to have a seventy-six-point expected move for the week, in line with the previous week. As always, it is recommended to stick to investing plans and long-term objectives.
