While the Fed is in its quiet period ahead of the May 1 conclusion of its next policy meeting, the volume of quarterly earnings reports rachets higher today and will continue to do so later this week. By the end of it, roughly 40% of the S&P 500’s basket of companies will have not only reported but will have also updated their guidance. Following last week’s Super Micro (SMCI) lack of a positive pre-announcement, something that spooked investors about the AI market, comments this week from Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META) will determine whether Big Tech rebounds or continues to correct. After today’s market close, Tesla (TSLA) will report and with the shares under pressure amid EV price cuts, slowing EV sales, and slashing the price of its Full Self-Driving (FSD) assisted driver software, the earnings call could be quite the spectator event. Recent appearances by Fed officials before the current quiet period pushed back further on the expectations for interest rate cuts. The reason? The “lack of progress” this year on inflation. At the same time, recent data lifted the Atlanta Fed’s GDPNow model forecast for the March quarter to +2.9%, a quicker pace compared to its early April figure.Today, the Flash April PMI report will give us an initial look at the inflation pressures and the speed of the economy entering 2Q 2024. Should the report’s findings mimic those in the February and March reports, it will indicate that inflation remains sticky and the economy remains on firm footing. That would be another reason for the Fed to take an even more conservative stance next week. Our thinking is the market will eventually come around to the likelihood that the soonest we could see a rate cut would be in the last two months of the year. But recent comments from Minneapolis Fed President Neel Kashkari that rate cuts may wait until 2025, suggests some at the Fed are contemplating that possibility. To us, it reinforces our view that Powell’s “more good data” was designed to let the market slowly realize the shrinking prospect of rate cuts. It also reminds us to follow the data and parse the Fed Chair’s words for his meaning, not the meaning we want to see in them. More By This Author:TSM Earnings, Fed Speakers, Quarterly Results & GuidanceMore Bank Earnings, Housing Starts, Waiting On Israel And Powell Fed Speakers, 10-Year Treasury Yield, And The Dollar
