After the first real decline of 2024, the US stock market recovered thanks to a robust earnings season and explosive reports from tech sector titans whether the positive vibes last could depend on next week’s inflation data.
After a 5% decline last month, the benchmark S&P 500 index is up over 9% for the year and is almost back to its record high set in late March.
A better-than-anticipated first-quarter reporting season for US companies has coincided with the rebound. According to LSEG IBES, with more than 80% of the S&P 500 having released results, companies are expected to have raised earnings by 7.8%, significantly exceeding the April growth estimate of 5.1%.
Even so, some investors are concerned that the rally may stall if there is no sign of inflation cooling down again. Despite Fed Chairman Jerome Powell’s assurances to the market that a rate increase is unlikely to occur anytime soon, months of high inflation have raised fears that the central bank will not lower rates this year.
Recent market reversals have been preceded by inflation reports due to the Fed raising interest rates to reduce consumer inflation from four-decade highs reached in 2022. Most recently, a two-week stock decline ensued after an April 10 release revealing a third consecutive month of higher-than-expected inflation, raising concerns that the Fed might hike rates this year.
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