Tech Equities and Interest Rates: Mega Cap Results and U.S. Statistics to Provide Insight

Mega cap results will test this year’s advance in tech equities, while U.S. statistics will provide additional insight into the future course of interest rates. The impact of the banking crisis from last month will be visible in European bank results, Eurozone data will guide the ECB’s decision-making, and the new governor of the BOJ will preside over his first policy meeting.

After a widely anticipated 25 basis point rate increase at its May policy meeting, investors are trying to predict whether the Federal Reserve will continue raising rates to combat inflation. Many anticipate that the central bank would reduce interest rates later this year to loosen the economy’s grip on higher borrowing costs.

The first quarter GDP data released on Thursday will be extensively scrutinised, along with the Fed’s preferred inflation indicator, the core PCE price index, and the employment cost index, all of which are scheduled for release on Friday.

Consumer spending is anticipated to continue to expand strongly according to GDP figures. The core reading is predicted to stay high even while the headline PCE price index is predicted to decline. Along with the employment cost index, inflation is still predicted to remain sticky.

Reports on consumer confidence, durable goods orders, pending and new home sales, initial unemployment claims, inflation forecasts, and regional manufacturing activity are all included in the economic calendar.

Investors will be watching the upcoming week’s earnings reports from some of the biggest names in technology to determine whether recent high advances in the industry are warranted. This will be a crucial test for the markets.

Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), the parent company of Google, and Amazon (NASDAQ:AMZN), three of the four largest U.S. corporations by market value, are all set to report, with Microsoft and Alphabet due out on Tuesday and Amazon on Thursday. Wednesday’s sandwich features Meta Platforms, parent company of Facebook (NASDAQ:META).

In response to a research firm’s forecast that Amazon’s North American business will exceed Wall Street expectations, the online retailer’s shares increased by 3% on Friday.

This year, investors have favoured tech and growth stocks on the belief that the Fed will soon cease raising interest rates and that the industry will withstand a slowdown in growth. Despite concerns about the possibility of a recession and the financial crisis that was brought on by the failure of Silicon Valley Bank and Signature Bank (OTC:SBNY) last month, this has helped stabilise the equities markets.

The following week will see the release of earnings reports from several renowned European banks, including UBS (SIX:UBSG), Deutsche Bank (ETR:DBKGn), Santander (BME:SAN), and Barclays (LON:BARC).

The results follow a first quarter for banks that was extremely volatile due to the failure of two regional U.S. lenders last month, the spectacular demise of Credit Suisse (NYSE:CS), and its hastily planned takeover by rival UBS.

At one point, the incident reduced the worth of Europe’s banks by about $180 billion. Despite the fact that the industry has since rebounded, it is still valued $70 billion less than it was prior to the early March collapse of Silicon Valley.

A day before UBS reports its first-quarter earnings, on Monday, Credit Suisse will reveal its results.

On Friday, the Eurozone will reveal preliminary figures on first-quarter GDP, and the same day, the region’s three major economies—Germany, France, and Spain—will issue their April inflation reports.

Recent economic data showed that despite tighter monetary policy, inflation is still persistent even if the bloc’s economy is still robust.

The dominant services sector in the Eurozone has performed well, which could mean that wage pressures are likely to continue high and impede the European Central Bank’s efforts to get inflation back to its objective of 2%.

At its upcoming meeting in May, the ECB is anticipated to raise interest rates for a record seventh time in a row. Most analysts anticipate a 25-basis point increase, although a greater increase has not been ruled out.

Despite not anticipating any changes to the ultra-dovish monetary policy of the central bank, new Bank of Japan Governor Kazuo Ueda will preside over his maiden policy meeting on Friday.

Ueda is under close examination for how he might lead the BOJ away from the sizable stimulus programme that has been in place for the past ten years without endangering the stability of the market.

Although Japanese inflation is above forecasts, Ueda has recently made comments that suggest he still thinks the stimulus measures are suitable for the time being.