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What's next for the S&P 500 after Friday's inflation data

Published 04/27/2024, 05:47 AM
© Reuters

The S&P 500 added 2.7% last week, buoyed by strong earnings reports from technology giants Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL), as well as an in-line PCE report for March.

This is despite Meta Platforms (NASDAQ:META) witnessing a sharp decline of over 10% in its stock price following a higher capex/opex forecast.

S&P 500 companies beating earnings estimates this quarter have seen a median share outperformance of just 0.2%, while those missing estimates have seen their shares underperform by a median of 4%, marking the largest gap in at least eight years.

What will Fed do next? Economists discuss

Inflation data has also been a focus last week in addition to the Q1 earnings season. The March core PCE inflation showed a month-on-month rise of 0.32% and a year-on-year increase of 2.8%.

This has led economists at Citi to anticipate a Federal Reserve rate cut in July, with a total of 100 basis points of cuts expected this year. The bank notes that while activity data, particularly in the labor market, may prompt a June cut, spending data was robust in March, with services strength appearing increasingly concentrated in sectors like healthcare.

"With just one month of inflation data for April before the June FOMC meeting, officials will likely have to wait until July to gain 'greater confidence' that inflation is slowing," they wrote in the report.

Evercore ISI economists pointed out that while March's headline and core price deflators were as expected, estimates for January and February were revised upwards.

They forecast an increase in payroll employment of +200K in April, with the unemployment rate dipping to 3.7%, and average hourly earnings growing by +0.3% month-on-month, or 4.1% year-on-year.

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Elsewhere, Bank of America's economists said that Friday's data "is indicative of strong demand rather than "stagflation"."

"That should keep the Fed on hold in the near term," they argued. 

The coming week is poised to be eventful with Amazon (NASDAQ:AMZN) set to report earnings on Tuesday and Apple (NASDAQ:AAPL) on Thursday.

Moreover, the Federal Reserve is scheduled to release its monetary policy statement on Wednesday after a two-day meeting.

According to Navellier & Associates, this week's meeting and FOMC statement are "going to be a big deal."

"The Fed typically cuts key interest rates before Presidential elections and this year is expected to be no different so the Fed interest rate cuts are still in the pipeline as Fed Chairman Jerome Powell has telegraphed," they said.

"But we will see what the Fed thinks going forward."

Latest comments

can you tell me how to start it
Look for the on/off switch on it
obviously after all the chatter this article concludes we have no idea what is next. Even as we wait and see then we still will not know. Personally I project the market will be much lower EOW and much lower by Memorial Day. AI will continue to be hyped by Amazon, Apple and any other company seeking a pump then dump.
Biden wants high inflation. More money for the government after the huge increase in long term capital gains tax.
Nothing matters anymore just buy stocks. Nothing has mattered since 2009 . They have your back and it will continue to go up. Trump wants to control the Fed. Massive inflation and massive money printing until it all implodes then that will be it forever. For now buy everything your money isn't worth anything. Noticed.
How can they project rate cuts, when none of the data Friday was a decrease. All numbers steady or rising. They're obviously trying to insight a rally before the end of the month to counter a weak April.
“Rate cut, for lack of a better word, is good. Rate cut is right. Rate cut works. Rate cut clarifies and cuts through to the essence of the evolutionary spirit.”
They? It's just CitiBank. Evercore ISI and Bank of America didn't project rate cuts. "That should keep the Fed on hold in the near term," they argued.
Can't agree more. I presume, given the terrible inflation / jobs data over the last months, the Fed will ignite the start of a big bear rally on 1st May. Unless something bad happens earlier in the next week.
i like youer company wait to can be with you soon
Large banks in control with higher govt debt so they can reap rewards but trump will oust powell - so i expect cuts in july -august.
Trump will deregulate banks gain for another banking crisis, and will attack Fed independence to seize more power for himself.
More deceptive manipulative 🐂💩AI hype and rate cut ....
The Fed lacks control over government spending. It will never again be able to make any positive economic adjustments as long as Congress remains out of sync with its stated gials.
Absolutely correct!
'government spending' is under fiscal policy, not monetary policy. The Fed have never had that control.
Gold
cam anybody say Rigged
So much for data driven rate cut decisions.
What do you mean? The banks' economists in this article did cite economic data.
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