Tech Titans Propel Wall Street to Best Week in Nearly 6 Months
Another week in the volatile world of U.S. stocks has come to a close, and what a week it was! In a surprising turn of events, Alphabet and Microsoft swooped in on Friday to save the day, propelling the markets to their best week since November. Microsoft, in particular, stole the show by surging 1.8% after exceeding profit and revenue expectations. It’s safe to say that the tech giants have definitely brought their A-game.
The rollercoaster ride of inflation reports this year has kept traders on their toes, with predictions shifting from six rate cuts to possibly just one. The latest report on Friday once again highlighted the persistent issue of high inflation, but interestingly, the financial markets seemed to take it all in their stride. Treasury yields even eased slightly following the report, a sign that perhaps the markets are slowly adapting to the ongoing inflation saga.
EY Chief Economist Gregory Daco remains cautiously optimistic, foreseeing a potential cool-down in inflation as consumer spending adjusts to slower wage growth. The Federal Reserve, on the other hand, has been playing a high-stakes game by maintaining interest rates at their highest level in two decades. Initially hinting at multiple rate cuts this year, Fed officials have now backtracked, emphasizing the need to keep rates elevated to combat inflation.
Vanguard’s global head of portfolio construction, Roger Aliaga-Diaz, echoed concerns that the Fed might find itself backed into a corner, unable to lower rates in the face of stubborn inflation. This predicament could spell trouble for companies looking to boost their stock prices, as high interest rates typically require stronger profit performances to keep investors happy. The pressure is on for businesses to deliver results in a challenging economic environment.
Meanwhile, across the pond, Japan’s Nikkei 225 experienced a modest 0.8% uptick after the Bank of Japan opted to maintain its current interest rates following a policy meeting. With global markets closely watching each move, it’s clear that the intricate dance between inflation, interest rates, and stock performance is far from over. As investors brace themselves for what lies ahead, one thing remains certain – the only constant in the stock market is change.
