Equities Extend Rally to New Records on Earnings Strength and Lower Energy Costs

Wall Street continued to rally with equities ending last week on a strong note. The S&P 500 and the NASDAQ closed at record highs, driven by robust corporate earnings, a potential end to the U.S. military involvement in Iran and easing crude oil prices. Each of the major benchmark indexes posted notable gains as stocks maintained momentum following their strongest monthly performance in years. Last week capped a solid week of corporate earnings. With over two-fifths of the S&P 500 companies reporting, 83% beat earnings expectations and 78% exceeded revenue forecasts. Market sectors were led by Communication Services, Energy, Information Technology and Consumer Discretionary. Materials, Industrials and Health Care lagged.

FOMC Maintains Policy Stance as Energy Prices and Geopolitics Complicate Outlook

The Federal Open Market Committee decided to maintain the target range for the federal funds rate at 3.50%-3.75%. In reaching its decision, the Committee noted that economic activity has been expanding at a solid pace. Job gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices. Further, the developments in the Middle East are contributing to a high level of uncertainty about the economic outlook. Finally, the Committee indicated that it would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals of maximum employment and returning inflation to its 2.0% objective.

Eye on the Week Ahead

The labor report for April is available this week. Employment had been waning over the past several months prior to March, when job growth exceeded expectations.