Investors monitor inflation and interest rate path amidst cautious optimism

US stocks market on Monday

The US stocks market was mostly flat on Monday. More clarity about the path of interest rate could be gained this week with a stream of tech-companies earning and fresh economic data releases. The Dow Jones industrial average index rose by 0.1% while S&P500 and Nasdaq composite both added 0.2%.

Earnings time

The tech sector is under the spotlight this week as Alphabet, Microsoft, Amazon, and Meta are among the high-interest names scheduled to announce their results for the first quarter. Analysts are predicting positive surprises from these companies following a year of economic disruption due to the pandemic. However, overall, first-quarter earnings for S&P 500 companies are estimated to decline by 5.2%, according to Refinitiv.

Economic data this week

Investors are also closely monitoring new economic data that will provide insight into whether inflation is cooling or if the Federal Reserve will announce another rate hike at its next meeting in early May. GDP numbers for the first quarter, as well as April’s consumer sentiment data, will be released, among other economic indicators.

Interest rate

Leveraged investors boosted net short positions on 10-year Treasury futures to a record this month, indicating that they think the Federal Reserve will keep raising rates to tackle inflation. This comes as the GDP data is forecasted to reveal slowing growth while the core PCE deflator, the central bank’s preferred inflation gauge, is expected to show price growth cooled.

Overall, while the stock market remains mostly flat, investors are cautiously optimistic about the tech sector's upcoming earnings reports and closely monitoring economic data to gain insight into the Federal Reserve's actions.