Market Insights

Stocks have pulled back as investors brace for more hawkish news from the Federal Reserve today.

The S&P 500 declined 4.2 percent in April, breaking a five-month winning streak that began in November. Selling was widespread across the index, with more than three-quarters of its members losing value. Utilities were the only sectors to rise, while real estate led to the downside.

Fed Chair Jerome Powell said last month that “a lack of further progress” on inflation makes him less willing to cut interest rates. He spoke after March’s consumer price index rose more than expected. A mix of categories drove the increase, including shelter, health care, energy and apparel. Investors worried inflation is getting more entrenched — especially after other readings later in the month seemed to confirm the trend. Borrowing cost rose as a result, and the market priced in fewer interest-rate cuts.

Two other catalysts added to the pain this week. On Monday, the Treasury Department raised its estimate for second quarter bond issuance from $202 billion to $243 billion. Yesterday, the Labor Department’s employment cost index for the first quarter rose more than expected.

The central bank will respond to this backdrop with its monetary-policy statement at 2 p.m. ET today, followed 30 minutes later by Powell’s news conference. Traders are likely to focus on how the Fed talks about inflation, which last meeting it said “remains elevated.” Changes to that wording could impact sentiment. Traders could also monitor details about quantitative tightening, which refers central bank holdings of Treasuries. Less “QT” is potentially dovish.

Big Movers in April

Sector Watch

Key Economic Events in April

Below are some key economic events from last month.

• Job growth beats by wide margin: Non-farm payrolls increased by 303,000 in March, far above the 200,000 forecast by economists. Healthcare and education drove the increase. The unemployment rate dipped to 3.8 percent, 0.1 percentage point below estimates. (4/5)
• Fed not convinced on inflation: Minutes from the March 20 Fed meeting suggested policymakers have less confidence that inflation is slowing to its 2 percent target. They were especially concerned about housing costs. Consumer prices earlier in the day were higher than expected. (4/10)
• Retail sales beat by wide margin: Retail sales increased by 0.7 percent in March, more than twice the 0.3 percent estimate. They grew 1.1 percent excluding autos, almost triple the 0.4 percent estimate. February’s total was also revised sharply higher. (4/15)
• GDP comes up short: Gross domestic product increased by 1.6 percent in the first three months of the year, missing the 2.5 percent forecast by economists. Price indexes were also higher than expected. (4/25)

What Experts Are Saying

Below are some noteworthy commentaries:

• Investing.com reported that Goldman Sachs thinks Chinese stocks may have bottomed as economic growth and earnings improve. (4/15) UBS upgraded the country a week later, noting that valuations have declined. The moves came as regulators looked to ease trading restrictions.
• Regional banks may remain under pressure because of commercial-real estate exposure, Sheila Bair told CNBC. Bair, former chair of the Federal Deposit Insurance Corp. (FDIC) also sees risk in their uninsured deposits. She expects large money-center banks to benefit as business shifts from smaller lenders. (4/16)
• Copper demand will surge because of electric vehicles, AI data centers and automation, Singapore-based commodities firm Trafigura told Reuters. The trends may add 10 million metric tons of consumption over the next 10 years, according to the report. (4/22)
• The S&P 500 may end the year little changed around 5,100, BMO Capital Markets chief Strategist Brian Belski told CNBC. He cited high valuations but still expects the bull market to continue over the longer term. Belski added that financials may outperform on stronger earnings. (4/26)
• Bernstein analyst Toni Sacconaghi upgraded Apple (AAPL) to “outperform” for the first time in six years, citing potential iPhone upgrades and better seasonality. He also sees a rebound in China and increased demand if AI functionality is added. (4/29)

Popular Futures Contracts in April

Newsworthy Events This Month

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