Stocks closed mixed after Wednesday’s rollercoaster trading. The S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq-100 (NDX) ended the day in the red, adding to their April losses, while the Dow Jones Industrial Average (DJIA) notched a small increase.
Last month was the worst for the major indexes since September 2023, as concerns about overstretched valuations, inflation, and geopolitics outweighed positive jolts from strong earnings reports at most of the large- and megacaps.
The Fed Rollercoaster
Investor anxiety was palpable ahead of the Federal Open Market Committee (FOMC) meeting. Market participants worried that a slew of data pointing at strong inflationary pressures would push policymakers towards a hawkish pivot.
When Jerome Powell strongly pushed back against the possibility of a rate hike, stocks jumped up with relief. However, they fell back down again as his comments also seemed to close the door on a cut this year. The Fed Chair cited the lack of progress on inflation in recent months, adding that it will take some time until policymakers are confident that the inflation rates are falling down towards the Fed’s target.
This means the “higher for longer” doctrine remains in place. Powell also reiterated that the central bank remains data-dependent, continuing to closely follow the incoming economic reports for input into their policy decisions. With so much at stake, markets are expected to react strongly to important data points, paving the way for volatile trading in the next months.
Earnings Season at Half Time
More than half of the S&P 500 companies have reported their first-quarter results so far, performing better than expected. 77% of the large-cap index firms have exceeded analyst EPS expectations, with 60% beating revenue projections. Analysts now expect earnings growth in the quarter to come in at 6.6% year-over-year.
One of the most market-moving reports – that of Apple (AAPL), the last reporting member of the Magnificent Seven group – will be published today after the market closes. Expectations are low, as the company continues to grapple with flagging iPhone sales and sluggish demand from China.
If the consumer-electronics behemoth is able to deliver a positive surprise, that could lend some strength to the markets. However, investor sentiment remains jittery, so any positive jolt may prove short-lived, especially ahead of the critical unemployment data release tomorrow.
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