Week of 04/22-04/26 Tech Earnings Fuel The Market, PCE Inflation Persists

The stock market rose on Friday as Google and Microsoft earnings lead another big tech rally, despite the PCE report for March showing increased inflation. The Fed's favored inflation gauge, the personal consumption expenditures (PCE) price index, rose 2.8% from a year ago and indicated slowing growth as well as persisting inflation. Alphabet (Google) and Microsoft reported earnings after-hours on Thursday, both beating earnings expectations and providing strong guidance for Q2 revenue growth. Both stocks surged as companies reported a strong focus in cloud growth and AI chips, which drove sympathy momentum across the tech sector. Additionally, Google announced its cash dividend program of $0.20 per share which makes the stock even more attractive for long-term investors. Meta reported strong earnings, but shared plans to aggressively invest in artificial intelligence, which received mixed reactions from investors and sent the stock plunging over 15% after-hours. The investment comes as a large expense in the short-term, affecting future earnings numbers, and its payoff will take time. Intel also reported earnings this week; beating analysts' expectations, but provided weak guidance on Q2 revenue growth as Intel battles its AI market share with Nvidia and AMD. The busy earnings season continues next week as the spotlight shifts to technology giants Apple and Amazon. The Federal Open Market Committee (FOMC) meeting will be held this upcoming Wednesday, where the FED will announce any changes, if any, to monetary policy. Analysts and investors expect interest rates to be held steady, but will be looking for clues on when the next cut may occur.

The Stock Market and Monetary Policy

The stock market's reaction to changes in monetary policy can be significant and often closely watched by investors and analysts. Monetary policy refers to the actions taken by a country's central bank to manage the money supply, interest rates, and ultimately, the overall economy. When there are changes in monetary policy, such as interest rate hikes or cuts, it can have a direct impact on the stock market. For example, if the central bank raises interest rates, it can increase borrowing costs for businesses and consumers, potentially leading to decreased spending and reduced corporate profits. This negative effect on the economy can lead to a decline in stock prices. On the other hand, if the central bank lowers interest rates, it can stimulate borrowing and investment, which may boost corporate profits and lead to an increase in stock prices. Therefore, changes in monetary policy can create fluctuations and volatility in the stock market as investors assess the potential impact on companies' earnings and economic conditions overall.