Last week, markets traded higher, with the S&P 500, Nasdaq, and Dow Jones gaining approximately 3%, while the VIX volatility index decreased as investors became more optimistic about trade tensions and corporate earnings. The current expectation is that new trade bilateral agreements will be announced soon.
In the corporate space, the tech sector reported better-than-expected quarterly results, with a solid performance from Microsoft and Meta. However, Apple and Amazon provided disappointing guidance. Despite this, the market traded stronger as revenues and profits from the Magnificent 7 continued to soar.
On the economic front, while US 1Q GDP came in lower than expected at -0.30%, the data was largely driven by a significant increase in imports, as companies ramped up purchases ahead of tariff implementation. Consumption and investment data were stronger than anticipated. We also saw robust payroll data, with 177k new jobs created, higher than the forecast of 138k. The unemployment rate remained steady at 4.20%.
The overall data, including corporate earnings growth, a resilient labor market, and healthy consumption, suggested that the US economy started the year on solid footing. Markets are currently pricing in around 75 basis points of Fed rate cuts this year, with the impact of new tariffs yet to be fully realized.
For this upcoming week, corporate earnings and developments on trade agreements will continue to be followed closely, while the most important event is the Fed’s rate decision on Wednesday. The central bank is widely expected to hold fed funds target at 4.25-4.50%, with all attentions at Jerome Powell’s press conference, and his comments about the economy and challenges ahead.
