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S&P 500 Holds Steady Amidst Earnings Reports, Investors Brace for Tightening Fed


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

The S&P 500 index closed nearly unchanged on Tuesday as investors analyzed a wave of corporate earnings reports and their impact on the US economy. The Dow Jones Industrial Average dipped slightly, while the Nasdaq Composite edged down a bit. Investors evaluated the latest batch of earnings reports, and although Bank of America beat first-quarter expectations, Goldman Sachs shares fell, and Johnson & Johnson’s stock dropped after the company beat estimates but lowered its 2023 guidance. Investors warn that profits topping already low expectations won’t matter to a market staring at a Federal Reserve that’s continuing to tighten into a potential recession.

Despite this, earnings season has so far proven resilient, and all the major averages are up since the period kicked off. However, more than eight out of ten traders anticipate a 25 basis point increase in interest rates next month, marking a stark contrast to the calls for a halt in hiking in March. Atlanta Federal Reserve President Raphael Bostic anticipates one more 25 basis point hike, followed by a hold at that level “for quite some time.” Earnings season continues with results from United Airlines and streaming giant Netflix.

Data by Bloomberg

On Tuesday, all sectors in the market saw an overall increase of 0.09%. Industrials, energy, and information technology were the top-performing sectors, with gains of 0.46%, 0.45%, and 0.41%, respectively. Materials and consumer staples also performed well, with gains of 0.40% and 0.33%. On the other hand, utilities, communication services, and healthcare sectors saw a decline of -0.51%, -0.65%, and -0.65%, respectively. The real estate sector had the biggest decline, down by -0.15%.

Major Pair Movement

Data by vtmarkets.com

On Tuesday, the dollar index decreased by 0.34%, despite the hawkish outlook of St. Louis Fed President James Bullard. The market is struggling to factor in more than one more 25bp U.S. interest rate hike. The dollar was impacted by the risk-on theme, which began when China’s Q1 GDP growth exceeded expectations. The ECB and BoE are expected to have more hikes, and the recovery of Chinese demand could assist non-U.S. exporters. Although Treasury yields and the dollar rebounded, the hawkish view remains at odds with the market, which is roughly pricing in only one more 25bp hike to 5%, followed by almost two 25bp rate cuts by year-end.

The EUR/USD rose 0.5%, while the GBP/USD increased by 0.4% due to the broader dollar setback and strong UK pay growth. GBP/USD traders are now focused on Wednesday’s UK inflation data, with overall inflation forecast at 9.8% versus 10.4% in February, yet vastly above the BoE’s 2% target. USD/JPY fell by 0.25%, and there is little U.S. data until Thursday, followed by Friday’s Global PMIs. Longer-term Treasury yields are driving prices, with the BoJ on hold.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
GBPConsumer Price Index (Year)14:009.8%