- Tech stocks pulled back as market participants took profits ahead of big tech earnings.
- Economists in a Reuters poll said there is a higher risk of a global recession.
- Over 70% of company earnings beat estimates, boosting equities.
Equities had a mixed start to the week, with the S&P 500 rising while the Nasdaq fell. Nevertheless, stocks ended higher last week as risk appetite improved on easing trade tensions between China and the US. At the same time, better-than-expected earnings boosted investor sentiment.
Nasdaq-100 index daily performance (Source: Bloomberg)
Trading was thin on Monday, and most stocks extended the rally from the previous week. However, tech stocks pulled back as market participants took profits ahead of big tech earnings. As a result, the Nasdaq ended lower.
Last week, equities rallied after China granted tariff exemptions on some US imports. The move further strengthened hopes of an end to the trade war between the two countries. Throughout the week, comments from top officials revealed that China and the US had adopted a softer stance on tariffs.
US Treasury Secretary Scott Bessent noted that the current tariffs were unsustainable. Therefore, they had to come down. However, he implied that China should be the first to lower tariffs. Meanwhile, Trump suggested that the US could lower tariffs on Chinese goods to 50%, potentially opening the door for negotiations.
Still, there is a pause as neither country is willing to be the first to cut tariffs. As a result, there is some uncertainty about the future. A move to lower tariffs would further boost risk appetite and the outlook for both economies.
Despite the easing tensions, economists in a Reuters poll said there is a higher risk of a global recession. What Trump has done since taking office will likely harm global growth. It will also shape company forecasts.
Last week, more companies reported earnings, bringing the total to 179. Of these, over 70% beat estimates, boosting equities. However, investors are more focused on forecasts and projections, which have dimmed with economic uncertainty. This week, major reports will include Amazon, Microsoft and Apple. More upbeat earnings will propel equities higher.
At the same time, market participants are awaiting key US economic reports. The nonfarm payrolls report will show the state of the labor market in April. The report might reflect the impact of Trump’s trade policies. A downbeat report will likely boost Fed rate cut expectations. On the other hand, a positive report might lead to a relief rally on Wall Street.
