Wednesday’s expected decision on interest rates from the Federal Reserve, along with earnings from several large tech and entertainment companies, could highlight a busy week ahead for investors. Palantir (PLTR), Advanced Micro Devices (AMD), Uber Technologies (UBER) and Walt Disney (DIS) are some of the companies scheduled to report earnings. The week is also set to bring fresh data on consumer credit, productivity and the U.S. trade balance. This week follows a stretch in which stocks shook off April’s losses and the S&P 500 on a historical winning streak. And it marks the start of a new era of sorts: Berkshire Hathaway’s Warren Buffett over the weekend announced his intention to step aside at the end of the year.
Fed’s Interest Rate Decision Comes Amid Political Pressure to Lower Rates
The Federal Reserve’s interest rate decision on Wednesday comes as the central bank faces increasing political pressure to lower interest rates. But so far, investors don’t expect the Fed will lower rates from its current levels of 4.25%-4.5%, according to the CME Group’s FedWatch tool. The Fed’s decision comes after the central bank got more encouraging inflation news last week when March’s inflation rate was in line with expectations, though still above the target. U.S. employers also added more jobs than expected in April, Friday’s jobs report showed. Federal Reserve Chair Jerome Powell’s comments after the decision follow weeks of scrutiny from President Trump, which has raised questions over whether the president could remove the Fed chair from his position and what that would mean for central bank independence.
On Friday, the Federal Reserve’s blackout period ends with a noteworthy event that will feature a string of speakers that include Federal Reserve Governors Lisa Cook and Christopher Waller, New York Fed President John Williams, Cleveland Fed President Beth Hammack and St. Louis Fed President Alberto Musalem. Also speaking at the event is former Fed Governor Kevin Warsh, a key adviser to Trump who has been critical of the Federal Reserve and is thought to be one of the president’s candidates to succeed Powell.
Investors may also look to other key economic releases this week, including trade balance data on Tuesday and initial jobless claims on Thursday. Wednesday’s scheduled report on consumer credit comes as economists are evaluating consumer health amid faltering confidence, while Thursday’s wholesale inventories report could provide insight on supply chain resilience as trade tensions remain high.
Palantir, AMD, Ford, Disney and More Report Earnings
Kicking off the week’s earnings, Ford is scheduled to report on Monday as the automaker has lowered its outlook under increasing pressure from Trump’s automobile tariffs. Palantir’s results after the bell Monday could also provide more insight into demand for artificial intelligence software. Advanced Micro Devices is scheduled to report on Tuesday as the semiconductor industry has come under pressure from tightening trade restrictions on exports to China, which AMD said could result in $800 million in costs. Ride-hailing company Uber and Danish pharmaceutical firm Novo Nordisk are set to follow Wednesday, along with Disney. The entertainment giant’s report Wednesday follows a better-than-expected quarter for the company as it continues to build out its streaming service, even as it reportedly laid off about 6% of its news and cable TV divisions.
Other companies due to release their latest quarterly financial results this week include Coinbase, Shopify, brewer Anheuser-Busch InBev, energy firms ConocoPhillips and Occidental Petroleum, delivery service DoorDash, online used car retailer Carvana and video game maker Electronic Arts.
What analysts are saying about U.S. stocks
RBC Capital Markets: “We are still seeing companies that beat consensus EPS forecasts outperform the broader market in terms of immediate stock price reaction within both the R1000 and the R2000. The margin of outperformance also remains wider than usual, suggesting to us earnings dynamics, not just the apparent pivot on trade policy, have been pushing the U.S. equity market higher. That being said, this phenomenon does appear to be losing some intensity since mid-April, suggesting to us that the U.S. equity market may soon demand another catalyst to keep the recovery going.”
Morgan Stanley: While there is a good amount of focus on the structural basis for a rotation away from the U.S., our focus is more on the cyclical elements of the U.S. versus international equities trade. This is the type of backdrop where higher quality areas of the market and indices (the S&P 500) tend to outperform on a relative basis. In particular, it’s a time when quality growth attributes tend to be rewarded as the cyclical impulse slows. U.S. large-cap indices stand out positively in this regard with more significant quality growth weights and lower volatility of earnings growth. A weaker dollar should also benefit U.S. relative earnings revisions breadth, which is now starting to inflect higher from low levels versus MSCI ACWI Ex-US—another tailwind for relative performance.”
Yardeni Research: Now that we are lowering the odds of a recession back to 35%, should we be raising our S&P 500 target back to 6400? We are inclined to do so given the power of the V-shaped rally in the S&P 500. However, we aren’t ready to do so given the following two issues,” the firm said, citing concerns over the deteriorating corporate earnings outlook and limited valuations upside.