Stocks rebounded as tech earnings spawned a rally in markets despite growing concerns that the Fed will hold interest rates higher for longer.The latest decision on interest rate policy from the Federal Open Market Committee is expected on Wednesday, followed by a media press conference with Fed Chair Jerome Powell. Markets widely expect the central bank will hold rates steady.
With the Fed committed to holding rates higher until it feels confident inflation is coming down, there is a continued focus on the health of the labor market. Resilient data has economists hopeful inflation can fall to 2% without the economy slipping into recession despite a higher interest rate environment.
This narrative will be put to the test once again in the week ahead when Apple and Amazon are scheduled to report earnings. Apple enters its report with shares down more than 11% this year amid growing concerns over a slowdown in demand. Meanwhile, Amazon is up more than 18% this year and hovering near an all-time high.for the S&P 500. With 46% of the index having already reported for the quarter, the index is tracking for earnings per share growth of 3.
Still, there has been a silver lining in earnings reports thus far: Profit margins are increasing. The S&P 500 is pacing for a net profit margin of 11.5% this quarter, above the 11.2% seen last quarter and in line with where margins were a year ago.back in January, a key question for investors in 2024 has been whether or not corporates will be able to preserve margins amid sticky inflation and high interest rates. For now, the answer appears to be yes.
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