The U.S. stock market seems to be under some pressure this morning, as traders look ahead to a busy week. Over the next few days, Wall Street will be intensely focused on corporate profit reports and the Federal Reserve’s evolving monetary policy.
In economic news, the FOMC (Federal Open Market Committee) will wrap up its two-day policy meeting on Wednesday afternoon. Traders will be closely watching the situation, which will culminate in the announcement of an interest-rate decision, alongside some prepared remarks. The majority of investors expect that the central bank will lift interest rates 50 basis points, as inflation has become an entrenched problem. A considerable rate increase should not come as a major surprise at this point, given the comments already voiced by Federal Reserve officials. Nonetheless, investors may be worried that an overly aggressive monetary policy could derail the economy. Later in the week, on Friday, the government will publish the April employment report. This issuance tends to be closely scrutinized, and could also have a considerable impact on the market.
In the corporate arena, the first-quarter earnings season continues to make progress, with a number of large companies set to report this week. On Tuesday, Pfizer (PFE), Starbucks (SBUX), and Advanced Micro Devices (AMD) will weigh in with their numbers. On Wednesday, CVS Heath (CVS) will deliver its report. So far, the current earnings season has failed to lift investor sentiment as it has in the past, and it is quite possible that corporate results are being overshadowed by larger economic and political concerns at this time.
From a technical perspective, the stock market has come under some pressure this year. The S&P 500 Index is in negative territory, and now seems to be locked in a sideways pattern, unable to deliver a sustainable rally. Investors seem to have grown cautious due to the inflationary environment and the Federal Reserve’s shifting stance, with the ongoing hostilities between Russia and Ukraine also adding to the uncertainty. Traders are clearly feeling risk averse, and continue to avoid the technology names that have provided leadership in the past. Instead, energy and materials issues now seem to be in favor. While it would be a constructive development to see more equity sectors participating in market advances, instead the situation seems somewhat fragmented as investors look for direction. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
