US stock market indices were mixed during the final hours of trading as investors grappled with several developments. The Dow Jones Industrial Average edged toward its third consecutive days of gains, increasing 0.2%, while the S&P 500 slipped marginally to just under 0.1% and the Nasdaq Composite inched lower by 0.1%. Analysts have attributed the mixed movements to investors contemplating the possibility of another rate hike by the Federal Reserve in May, escalating geopolitical tensions between the US and China over Taiwan, and the forthcoming update on major inflation indicators in two days.
As yields on 10-year US Treasury notes remain volatile in the wake of heightened inflation rates, investors are also closely monitoring the corporate earnings season. They are particularly anticipating the release of the first quarter earnings from major banks such as JPMorgan Chase, Wells Fargo and Citigroup later in the week. Earlier, US President Donald Trump tweeted that Russia should “get ready” for military action in Syria in response to a recent suspected chemical weapons attack, adding uncertainty to the markets. Fears of a potential trade war between the US and China have also been bubbling under the surface, putting pressure on the stock market.
Moreover, after a data breach that compromised the personal information of nearly 87 million users, Facebook CEO Mark Zuckerberg testified before the Senate on privacy and data protection issues. His appearance triggered a rally in the social media giant’s stock during the hearing, with Facebook shares surging 4.5% at close, providing substantial support to the Nasdaq and the benchmark S&P 500 index. Amazon.com shares followed suit, rising by 4% after it reported over 100 million Prime subscribers during CEO Jeff Bezos’ annual shareholder letter.
Despite an overall mixed bag of gains and losses, market analysts are keeping a close eye on the spate of earnings reports scheduled for release from major US companies this week. They are especially interested in the results from the large banking firms, which usually serve as the bellwethers for the general sentiment on how the corporate earnings season will establish itself. Previous earnings reports have already shown that the recently-passed Trump tax reform law has provided substantial benefits to major US firms.
The combination of geopolitical concerns, inflation fears and key first quarter earnings releases will continue to influence stock movements in the coming days, but any significant expectations of growth remain largely uncertain. With corporate earnings and US economic data projected to provide further momentum to the bull market’s upward trajectory, investors have been demonstrating higher levels of caution in their approach.
Economists and financial experts have also noted the potential impact of inflation on the stock market, specifically the anticipated rise in interest rates by the Federal Reserve. While the Fed opted not to raise rates during its most recent meeting in March, the possibility of an increase in May now looms. Speculation is rife that a succession of interest rate hikes may spook investors, leading to edginess in equity markets as they grapple with the likelihood of a slowdown in economic activity.
Overall, the US stock market’s performance remains uneven, adding to investor concerns in different sectors. Although the Dow Jones recorded modest gains and the Nasdaq showed some improvement on the back of Facebook and Amazon’s renewed fortunes, the S&P 500 maintained a downward trajectory. The markets are now set to remain focused on the coming week’s first quarter earnings reports from key players, the implications of any inflation indicators and the ongoing geopolitical environment.
