Investors Prepare for Big Day With Meta and Microsoft Earnings and Key Data
Here's what to know and expect as results from two Magnificent Seven names will follow GDP and PCE inflation reports.
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Investors have been intently focused on tariffs and trade recently, with hopes of deals helping to propel the S&P 500 to six straight days of gains. There is an expectation that a trade deal with India will be announced very soon, but market players will be shifting their attention to earnings and economic news on Wednesday.
The day will start with the GDP report at 8.30 am ET. It is expected that there will be a sharp slowdown in growth to just 0.4% from 2.4%, and some economists are predicting a negative number. Although there has been some pull-in of business activity in anticipation of tariffs, the tariff chaos has put many others on hold due to the great uncertainty. A tepid GDP report will very likely trigger even more speculation about a recession, with many pundits declaring that the U.S. is already in one.
At 10 p.m. ET, PCE inflation news will be released. This is the Fed’s preferred inflation report, and the expectation is that it will be flat. A confirmation of 0% inflation over the past month will give the Fed more justification for interest rate cuts. No cut is expected at the next meeting in May, but the chances of one in June are increasing. Indeed, one of the forces driving the market recently is increased hopes of a more dovish Fed.
After the close, Meta META and Microsoft MSFT will report earnings. The numbers will likely be solid, but there are two other issues that will be of major concern. The first is the level of capital expenditures for AI. There is a market narrative that took hold in the last several months that AI spending was excessive, and there have already been some cuts to spending in that area. Both Meta and Microsoft will address this issue, which will likely have a ripple effect in technology.
The other key issue will be forward guidance. Many companies have pulled their guidance due to uncertainty over tariffs and trade negotiations. It is highly likely that the Magnificent Seven MAGS stocks will also forego making predictions about what the future holds. That is understandable, but without guidance, it becomes nearly impossible to value stocks, and that means that any immediate upside is likely limited.
The earnings onslaught continues on Thursday when Amazon AMZN and Apple AAPL report.
Technically, the market has been acting quite well, but it is now extended and heading into areas of overhead resistance. Conditions are ripe for some "sell the news" action on these major news events, but the primary issue is the level of support that will attract dip buyers.
It should be a volatile day, and I’ll be focused primarily on managing positions rather than looking for new entries.
At the time of publication, Rev Shark had no positions in any securities mentioned.
