Weekly Market Watch

TGIF

A second consecutive volatile week for equities ended with a Friday rebound. U.S. equities pulled back modestly, led by software equities within the Information Technology sector, due to artificial intelligence (AI) disruption concerns. Led by Japan, international equities extended their relative outperformance streak in response to Japan’s election results, expected stimulus and with the aid of a weaker U.S. dollar.

Fixed income markets rallied due to a combination of risk-off sentiment and tame inflation data. U.S. Treasury yields fell across most maturities and market expectations for rate cuts later this year, rose. Precious metals ended the week relatively flat; gold and silver prices moderated from their furious start to the year.

Market Outlook

Despite some conflicting economic data last week, the payroll and inflation reports suggested a stable labor market and moderating inflation. That backdrop should enable easier monetary policy later this year, but for now, the Federal Reserve remains on hold.

Market sentiment in the short term has been focused on capital expenditures and AI disruption, but we expect the focus to shift to the durability of global economic growth, combined with AI proliferation and its productivity enhancements. In that environment, there are benefits to broad-based equity exposure.

Table of the Week

The S&P 500^® blended earnings growth rate improved by 30 basis points from the prior week, led by the Industrials sector.

Earnings growth was driven by several sectors. Industrials benefited from strong aerospace and transportation-related demand, consumer-related companies continued to see resilient spending trends and the Technology sector was propelled by strong AI-related demand.

The index, excluding the Mag 7, is set to more than double the expected growth rate from the start of the quarter, thanks to a broader set of companies that are helping to drive earnings growth.

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For definitions of indexes used in this publication, please refer to pnc.com/indexdefinitions.

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