Weekly Market Watch

Market Outlook

U.S. GDP growth came in below market expectations; however, the report showed U.S. consumers remain healthy and willing to spend. Friday’s Personal Consumption Expenditure (PCE) report showed inflation remains above the Federal Reserve’s 2% target, causing investor expectations for rate cuts to again shift into the future. The 10-year U.S. Treasury yield climbed above 4.7%, a level last seen in November 2023.

Earnings from a subset of “Magnificent 7” (M7) companies allowed the S&P 500^® to avoid closing lower for the fourth straight week. Strong reports from Microsoft Corp. and Alphabet, Inc. exceeded investor expectations, adding to enthusiasm for artificial intelligence (AI).

This week, the outcome of the Federal Open Market Committee (FOMC) meeting and the release of April’s nonfarm payrolls report are key events for investors. We do not expect the FOMC to adjust its current policy stance.

Chart of the Week

The blended earnings growth rate improved 300 basis points (bps) from the previous week; however, excluding the M7, growth was closer to 200 bps.

Several M7 companies beat on both the top and bottom lines, fueled by cloud growth, ad revenue and ample demand for AI.

With first-quarter earnings on track to meet expectations, second-quarter estimates have dropped nearly 40 bps since the beginning of the quarter.

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