Stock markets notched a sharp weekly drop as hawkish Fed and geopolitical tensions depressed risk sentiment, raising concerns about the overvaluation of technology stocks. The AI hardware and semiconductor producers were at the helm of the selloff, as cautious guidance from several industry leaders raised fears about AI-related chip demand.
Federal Reserve officials have sounded increasingly hawkish in recent weeks, as the economy’s strength and sticky inflation dampened expectations for interest-rate cuts. Moreover, some policymakers voiced a possibility of a rate increase if consumer demand remains above the level needed to stamp out inflation, further depressing risk sentiment and fanning selling pressure.
Investors are bracing for one of the busiest weeks of the year in terms of earnings reports from prominent companies belonging to various economic sectors. While their results and guidance will have an immense impact on stock markets, investors are also advised to closely follow the upcoming economic reports. With policymakers at a crossroads, any deviation from expectations could push the needle in either direction, strongly affecting market sentiment.
Four Economic Events
Here are four economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» April’s S&P Global Manufacturing PMI and S&P Global Services PMI (preliminary readings) – Tuesday, 04/23 – These reports capture business conditions in the manufacturing and services sector, which together comprise almost all of the nation’s GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
» Q1 2024 GDP Growth Annualized (preliminary estimate) – Thursday, 04/25 – This report provides an initial glimpse of the economy’s health in the previous quarter. The U.S. Bureau of Economic Analysis (BEA) estimates that the economy has slowed to 2.1% from Q4’s 3.4%, whereas Atlanta Fed’s GDPNow model pencils in a 2.9% increase. Meanwhile, Goldman Sachs’ economists said that a surge in retail sales in February and March has prompted them to lift their estimate for the first quarter to a 3.1% annualized rate.
» March’s Core Personal Consumption Expenditures (Core PCE) – Friday, 04/26 – This report reflects the average amount of money consumers spend monthly, excluding seasonally volatile products such as food and energy. FOMC policymakers use the annual Core PCE Price Index as their primary inflation gauge. BEA expects the March’s Core PCE to match February’s annual rate of 2.8%, well above the Fed’s 2% target.
» March’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations – Friday, 04/26 – These reports portray the results of a monthly survey of consumer confidence levels and consumers’ views of long-term inflation in the United States. The confidence level affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed’s Index of Inflation Expectations calculations.
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