- Over 80% of the S&P 500 has released results during the first-quarter reporting season.
- Firms are expected to have reported 7.8% growth in earnings, exceeding the 5.1% growth predicted for April.
- Rate reductions for 2024 may be priced out if the CPI report shows higher inflation.
After the first big decline of 2024, the U.S. stock market recovered thanks to a stellar earnings season and explosive reports from major players in the IT sector. Surpassing its record high set in late March, the benchmark S&P 500 index has gained more than 9% in value this year.
Well over 80% of the S&P 500 has released results during the first-quarter reporting season, which has been stronger than anticipated for US corporations. This corresponds with the rebound. Firms are expected to have reported 7.8% growth in earnings, exceeding the 5.1% growth predicted for April.
US markets
Some investors, nevertheless, are concerned that if there is no proof that inflation is declining once more, the boom may come to an end. Although Fed Chairman Jerome Powell has reassured investors that a rate increase is unlikely to occur anytime soon, fears about a lack of rate cuts this year have been raised by months of high inflation.
Although investors now feel more at ease in the market due to strong earnings, the direction of inflation is always crucial when we’re in a cycle where rate cuts are anticipated from the Fed.
As the Fed has increased interest rates to reduce consumer inflation from four-decade highs reached in 2022, inflation reports have recently preceded market turns. Most recently, an announcement on April 10th that revealed a third consecutive month of higher-than-expected inflation sparked fears that the Fed might hike rates this year and resulted in a nearly two-week fall in stocks.
Reuters surveyed economists predict that the consumer price index report on May 15 will reveal a 0.3% increase in April over March. Next week, investors will also be looking forward to earnings reports from Cisco, Home Depot, and Walmart as well as statistics on retail sales. Rate reductions for 2024 may be priced out if the CPI report shows higher inflation.
