NEW YORK: Investors will look for another batch of earnings reports and fresh employment data to drive a resilient US stocks rally higher next week, in the face of spiking oil prices and a more hawkish Federal Reserve.
Major US stock indexes were at record-high levels on Thursday, following a sharp month-long rebound from concerns about economic fallout from the Middle East war. A broadly strong season for corporate profits is underpinning bullishness for US equities and countering other market headwinds.
The benchmark S&P 500 and the technology-heavy Nasdaq Composite both ended April on Thursday with their biggest monthly gains since 2020. The S&P 500 rose more than 10 percent for April, while the Nasdaq jumped over 15 percent.
“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.”
Stocks this week largely shrugged off a renewed surge in oil prices with benchmark Brent crude topping USD120 a barrel and hitting a four-year high before pulling back. Energy markets were poised to swing on developments in the two-month US-Israeli war with Iran, which has choked off a major supply of oil.
While a ceasefire agreement helped catalyze the stock market’s rebound, continued tensions in the Middle East were poised to keep investors on edge.
“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 USD120, 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.”
More than 100 companies in the S&P 500 are set to post results next week, with markets digesting the heart of the reporting season. Overall S&P 500 earnings as of Thursday were on track to climb more than 20 percent in the first quarter from a year ago, according to Tajinder Dhillon, head of earnings and equity research at LSEG Data & Analytics.
This week, megacap companies investing in artificial-intelligence infrastructure reported results that yielded mixed market reactions. Shares of Alphabet jumped on Thursday after the Google parent showed blowout cloud-computing growth, while shares of Microsoft and Meta Platforms slumped after less stellar results.
Data analytics firm Palantir, entertainment company Walt Disney and restaurant chain McDonald’s are among the high-profile companies due to report next week.
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