Market Pulse

In focus

The tug-of-war between the bulls and bears continued again last week, leaving equity markets close to where they started. Corporate earnings gained momentum, yet there was no clear message that either the bulls or bears could rally behind enough to take a meaningful stand.

While markets have seemed to be a little hesitant to move one way or the other, big tech earnings have been on the horizon as a guidepost for the potential next leg. With several mega cap tech companies set to report this week, investors will learn if these year-to-date outperformers are deserving or not and if widespread cost cutting lay-offs have been enough to preserve margins. Also important for these tech giants will be updates on artificial intelligence, which has been a central theme this year and appears positioned to be a major disruption.

In tandem with several important earnings reports, economic data will play a critical role this week as well. After mixed data last week, investors will look for further clarity on economic activity. Top of mind is housing activity, first quarter Gross Domestic Product (GDP), and Personal Consumption Expenditures (PCE) − the Federal Reserve’s (Fed) preferred inflation gauge. With the Fed’s May Federal Open Market Committee Meeting only a week away, both economic updates and corporate earnings will factor into their upcoming rate decision. 

A look back

• Global stocks were mixed last week. International developed markets outperformed, ending the week modestly higher. U.S. stocks finished slightly lower, while emerging markets equities were the laggards on the week.
• Treasury yields rose modestly, leaving the 2-/10-year yield spread mostly unchanged.
• Economic data varied with mixed manufacturing signals that many felt skewed in favor of another 0.25% Fed rate increase.

A look ahead

• This week, earnings season kicks into high gear with a focus on mega cap tech and communication services companies.
• Combined with big tech earnings, the slew of economic data this week could tip the scales in the tug-of-war between bulls and bears which so far has kept markets range bound.
• Economic releases: Consumer Confidence, Durable Goods Orders, GDP, New Home Sales, PCE, Wholesale Inventories, Univ. of Michigan Sentiment.

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