MICHAEL M. SANTIAGO/GETTY IMAGES

First Published: April 24, 2023 at 4:31 a.m. ET

By Vivien Lou Chen and William Watts

The Nasdaq Composite ended slightly lower as investors prepared for a busy week of earnings that will include results from megacap tech heavyweights, while the Dow Jones Industrial Average and S&P 500 eked out small gains.

On Friday, stocks eked out tiny gains, but ended the week with small losses. The S&P 500 lost 0.1% for the week, while the Dow shed 0.2% to end a streak of four straight weekly gains. The Nasdaq Composite gave up 0.4% last week.

What drove markets

U.S. stocks saw little movement amid a cautious tone that had enveloped markets for much of Monday, as investors prepared for a busy period of corporate results and U.S. economic data that could impact the Federal Reserve’s interest-rate decision on May 3.

That data includes a March inflation update from the U.S. personal-consumption expenditures index, the Fed’s preferred price gauge, which will be published on Friday. Economists polled by The Wall Street Journal expect the narrow core PCE reading, which strips out volatile food and energy, to come in at 4.5% year-over year — versus 4.6% for February.

Meanwhile, “there’s a great deal of caution heading into what could be a very pivotal earnings week, in which the busiest days are Tuesday, Wednesday and Thursday,” said Art Hogan, chief market strategist at B. Riley Wealth.

“What’s weighing on the market is concerns about earnings and guidance, the potential for the Fed to keep raising rates, and the possibility that the economy may be slowing and heading into a recession,” Hogan said via phone on Monday.

This week will see 178, or 35%, of the S&P 500 components report their numbers and it’s tech-related earnings that will be in the spotlight.

Google parent Alphabet Inc. GOOG, +0.82% and Microsoft Corp. MSFT, -1.40% report Tuesday, Facebook parent Meta Platforms Inc. META, -0.05% follows on Wednesday, and Amazon.com Inc. AMZN, -0.70% closes out the week on Thursday afternoon.

“Many tech stocks have risen dramatically in recent months, which is reminiscent of the last four bear market rallies in the past 16 months, and none of these periods ended well for tech stocks,” said James Demmert, chief investment officer at Main Street Research in New York City, which manages roughly $2 billion in assets.

“This latest rally in tech seen over the past few months has been especially fueled by a notion the Fed will cut rates in the back half of the year, which we think is overly optimistic,” he wrote in an email. “Though certain sectors of tech can be a more defensive play, tech in general is not a safe haven, particularly when it comes to tech stocks whose P/E [price-to-earnings] multiples significantly exceed their revenue growth rates.”

‍

Read the full article here.