Everything to know about the April 8 eclipse in Atlantic Canada | SaltWire #eclipse | SaltWireNEW YORK - The U.S. stock market is the most expensive it has been in around two years. Its valuation could be put to the test as companies report earnings in coming weeks.
Signs of stubborn inflation have diminished expectations in recent weeks for how deeply the Federal Reserve will cut rates this year. Stocks rose after another stronger-than-expected employment report on Friday. Analysts expect to see earnings growth of 5% in the first quarter, according to LSEG data. That would be the lowest since the second quarter of 2023. They expect margins to be squeezed by high interest rates, rising commodity costs, and falling corporate pricing power due to slowing inflation. Earnings grew by 10.1% in the fourth quarter of 2023.
"These businesses now need to justify these high valuations," said Bryant VanCronkhite, a portfolio manager at Allspring Global Investments."The market is looking for every company to talk about their demand drivers and articulate what they see coming ahead." Liz Ann Sonders, chief investment strategist at Charles Schwab, said she expects “punishment” of companies that fail to meet expectations.As always, the Fed will loom large in investors’ minds. A robust earnings season and expectations of growing price pressures from companies could be seen as further evidence that the economy is too strong for the central bank to cut rates without risking an inflationary rebound.