Strong earnings report pushes U.S. stocks higher, but key inflation report remains cloudy

A strong earnings season and blockbuster reports from tech giants have helped U.S. stocks rebound from their first real downturn in 2024.

A strong earnings season and blockbuster reports from tech giants have helped U.S. stocks rebound from their first real downturn in 2024.
The S&P 500 is up more than 9% year to date, nearing its all-time high in late March, after retracing 5% last month.
The rally overlapped with a stronger-than-expected Q1 earnings season.
According to LSEG data, with more than 80% of companies in the S&P 500 reporting results, earnings are expected to grow 7.8%, far exceeding the 5.1% expected in April.
However, some investors worry that the gains could stall without evidence that inflation is cooling again.
Although Fed Chairman Jerome Powell has assured markets that a rate hike is unlikely anytime soon, months of strong inflation have stoked concerns that policymakers will not cut interest rates this year.
Art Hogan, chief market strategist at B Riley Wealth, said the strong profits \”made investors feel more comfortable entering this market.\”
However, \”inflation trends are always important when the next step from the Fed is expected to be a rate cut.
Inflation reports have dominated the market in recent years as the Federal Reserve raises interest rates to cool consumer inflation from a high of 40 in 2022.
U.S. stocks have fallen for about two weeks after inflation in the past three months has been stronger than expected, raising concerns that the Federal Reserve may raise interest rates this year.
Economists expect the Consumer Price Index (CPI) report to be released on May 15 to show a monthly increase of 0.3% in April.
Investors will also await next week\’s retail sales data and earnings data from Walmart (WMT-US), Home Depot (HD-US) and Cisco Systems (CSCO-US).
\”Any chances of a rate cut in 2024 may be offset if CPI reports get hotter,\” said Miskin, co-chief investment strategist at John Hancock Investment Management.
\”If inflation gets too high relative to expectations you may have to start talking about more restrictive policies.\”
\”Currently, bull investors have gained confidence from the solid earnings season.
Highlights included generally strong earnings reports from most of the so-called \”Big Seven\” and large-cap stocks that helped drive the market higher last year and continue to command huge weightings in the S&P 500.
Among them, Google parent Alphabet (GOOGL-US) announced its first dividend, its sales and profits exceeded expectations; while Apple\’s (AAPL-US) revenue fell less than feared and the iPhone maker reported $110 billion The stock buyback plan is the largest in the history of American companies.
Yongyu Ma, chief investment officer of BMO Wealth Management, said: \”The earnings surprise is enough to support the market.
“There was some concern that this earnings season might be somewhere between mild and weak but that didn’t happen.
LSEG senior research analyst Tajinder Dhillon said that because NVDA-US is the last company among the \”Big Seven\” to announce financial reports on May 22, the \”Big Seven\” last quarter profit is expected to be Jumped 49.4%.
Analysts have also become more optimistic about the financial prospects of large-cap stocks.
Jessica Rabe, co-founder of DataTrek Research, said that the 2024 profit expectations of the six large companies that have reported earnings in the past 30 days have increased by an average of 2.1%, while the S&P 500 index\’s overall 2024 profit expectations have only increased by 0.1%.
Still, investors punished companies that fell short of expectations.
A note from Manish Kabra, chief U.S. equity strategist at Societe Generale, showed the stocks underperformed the market by 3.2% this quarter compared with 1.2% in the previous quarter.
Cabra said the reaction was \”not surprising as the quarter overlapped with bond market volatility and strong performance in the run-up to the report\”.

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