Last week’s growth was 2.7%, helped by strong earnings reports from tech giants Microsoft (NASDAQ:) and Alphabet (NASDAQ:), as well as PCE’s operational report for March.
This is despite Meta Platforms (NASDAQ:) seeing its share price plummet by more than 10% following a higher capex/opex forecast.
S&P 500 companies that beat earnings estimates this quarter saw their median stock return top just 0.2%, while those missing estimates saw their stocks underperform by an average of 4%, marking the widest gap over the past eight years.
What will the Fed do next? Economists discuss
Inflation data was also in focus last week in addition to the first quarter earnings season. Core PCE inflation in March showed an increase of 0.32% month-on-month and 2.8% year-on-year.
That has prompted Citi economists to expect the Federal Reserve to cut rates in July, with rates expected to cut by a total of 100 basis points this year. The bank noted that while activity data, especially in the labor market, may lead to a contraction in June, spending data in March was good, with strength in services appearing to be increasingly concentrated in sectors such as health care.
“With only one month of inflation data available before the June FOMC meeting, policymakers will likely have to wait until July to gain “greater confidence” that inflation is slowing,” they wrote in the report.
Economists at Evercore ISI noted that while core and underlying price deflators for March were as expected, estimates for January and February were revised upward.
They forecast employment to increase by +200K in April, with the unemployment rate falling to 3.7% and average hourly wages rising +0.3% month over month or 4.1% year over year.
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Elsewhere, Bank of America economists said Friday’s data “suggests strong demand rather than ‘stagflation’.”
“This should put the Fed on hold in the near future,” they argue.
The week ahead is shaping up to be a busy one, with Amazon (NASDAQ:) reporting earnings on Tuesday and Apple (NASDAQ:) reporting earnings on Thursday.
Moreover, the Federal Reserve is scheduled to release its monetary policy statement on Wednesday after its two-day meeting.
This week’s FOMC meeting and the FOMC statement “will be significant,” according to Navellier & Associates.
“The Fed typically cuts key interest rates ahead of presidential elections, and this year is expected to be no exception, so Fed rate cuts are still in the works, as Fed Chair Jerome Powell has telegraphed,” they said.
“But we’ll see what the Fed thinks going forward.”