Wall Street investors are banking on upcoming corporate earnings reports and April employment figures to keep the current stock market surge alive next week, even as oil prices climb and Federal Reserve officials take a tougher stance on interest rates.
The major stock indexes reached record territory Thursday, capping off a remarkable recovery from earlier worries about economic damage from Middle East conflicts. Strong corporate profit reports have been boosting investor confidence and helping offset other market challenges.
Both the S&P 500 and the tech-focused Nasdaq finished April with their strongest monthly performance since 2020. The S&P 500 climbed more than 10% during April, while the Nasdaq soared over 15%.
“We have these fast-rising profits on one side, and then on the other, we have upward pressures on oil prices and bond yields,” said Angelo Kourkafas, senior global investment strategist at Edward Jones. “We’ve rallied a lot in April, so potentially we may enter some period of consolidation as this pull and push is playing out.”
This week, markets mostly ignored a fresh spike in oil costs, with Brent crude oil reaching above $120 per barrel and hitting a four-year peak before retreating. Energy markets remain volatile due to the ongoing two-month conflict between the U.S.-Israel alliance and Iran, which has disrupted major oil supplies. Although a ceasefire helped spark the stock market recovery, ongoing Middle East tensions continue to worry investors.
“With each passing day, the economic risk grows,” said Jeff Buchbinder, chief equity strategist for LPL Financial. “If we’re sitting here in a month or two, and Brent crude is still over $120, and we’ve still got a blockade and maybe bombs are still falling, that is a very different scenario than what we’re looking at right now.”
Over 100 S&P 500 companies are scheduled to release quarterly results next week, representing the peak of earnings season. Through Thursday, overall S&P 500 company profits were tracking to increase more than 20% in the first quarter compared to last year, according to Tajinder Dhillon, head of earnings and equity research at LSEG Data & Analytics.
This week brought mixed reactions to results from major technology companies investing heavily in artificial intelligence. Alphabet shares jumped Thursday after Google’s parent company delivered exceptional cloud computing growth, while Microsoft and Meta Platforms stocks declined following disappointing results.
High-profile companies reporting next week include data analytics firm Palantir, entertainment giant Walt Disney, and restaurant chain McDonald’s.
Semiconductor company Advanced Micro Devices will also draw attention, given recent spectacular gains for chip stocks, noted Michael O’Rourke, chief market strategist at JonesTrading. AMD shares have surged approximately 80% over the past month, while the Philadelphia SE Semiconductor index has risen over 45%.
“This is the group that is dominating the tape and dominating the market,” O’Rourke said. “Any datapoints you get are going to be really important.”
The April jobs report, scheduled for release May 8, is projected to show 73,000 new positions added, according to economists surveyed by Reuters. This would represent a decrease from March’s 178,000 jobs but an improvement from February’s sharp employment drop.
“It’s a slow job market, but the job market is still hanging in there,” Buchbinder said.
Thursday’s economic data revealed that U.S. growth accelerated during the first quarter, with artificial intelligence spending helping boost business equipment investments.
The upcoming employment data comes as prospects for stock-friendly interest rate reductions appear less likely this year. This week’s Federal Reserve meeting exposed unexpected divisions within the central bank, as three board members opposed policy statement language they believed inadequately addressed inflation risks that might necessitate rate increases.
This more aggressive Fed position, combined with rising oil prices, drove benchmark U.S. Treasury yields to one-month highs. The closely watched 10-year Treasury yield recently stood near 4.4%. Higher yields could create problems for stocks by increasing borrowing costs for consumers and businesses.
“The 10-year above 4.5% will certainly catch more investors’ attention,” Kourkafas said. “At that point, investors might start rethinking valuations and get a little more worried.”
