A Fed meeting, jobs report, and more Big Tech earnings: What to know this week

Josh Schafer · Reporter
7 min read

In This Article:

Stocks rebounded as tech earnings spawned a rally in markets despite growing concerns that the Fed will hold interest rates higher for longer.

The Nasdaq Composite (^IXIC) rose more than 4% last week, while the S&P 500 (^GSPC) popped almost 3%. Meanwhile, the Dow Jones Industrial Average (^DJI) rose less than 1%.

In the week ahead, a Fed meeting, the April jobs report, and earnings from Big Tech stalwarts Apple (AAPL) and Amazon (AMZN) will test the recent optimism in markets.

Updates on job openings, activity in the services and manufacturing sectors, and consumer confidence are also on the calendar.

Companies reporting earnings include AMD (AMD), Coca-Cola (KO), Eli Lilly (LLY), McDonald's (MCD), Novo Nordisk (NVO), Starbucks (SBUX), and Super Micro Computer (SMCI).

An update from the Fed

The latest decision on interest rate policy from the Federal Open Market Committee is likely on Wednesday, followed by a media press conference with Fed Chair Jerome Powell. Markets widely expect the central bank will hold rates steady.

Investors will be closely listening for how the Fed is interpreting recent hotter-than-expected inflation data given that the market has scaled back its rate cut expectations.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

"Another round of elevated inflation data is likely to lead to a more hawkish-leaning message at the May FOMC meeting," Deutsche Bank chief US economist Matthew Luzzetti wrote in a research note on Friday. "While we expect the Committee will maintain an easing bias, we also anticipate the statement and press conference will echo Chair Powell’s view that firmer inflation prints suggest it will take longer to gain confidence about disinflation."

Since Powell said publicly on April 16 that inflation was taking "longer than expected" to fall to the Fed's 2% target, data on price increases has come in above expectations. Most recently, the core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 2.8% over the prior year in March, above estimates for 2.7% and unchanged from the annual increase seen in February.

After the print, investors were pricing in just a 33% chance that the Fed cuts rates in July, down from an 83% chance a month ago, per the CME FedWatch tool.

A look at the labor market

With the Fed committed to holding rates higher until it feels confident inflation is coming down, there is a continued focus on the health of the labor market. Resilient data has economists hopeful inflation can fall to 2% without the economy slipping into recession despite a higher interest rate environment.

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