Blog – Stock Market Analysis for the Weekend April 28 2023 • Stocks close higher to end the week – The U.S. and Canadian equity markets closed sharply higher on Friday. This comes even as Amazon warned about cooling growth in its cloud-computing business. In addition, investors are monitoring the fate of First Republic Bank, which was down about 49% on the day and over 95% for the week*. The bank is seeking strategic alternatives and will likely require support from the government or larger banks for it to remain solvent. Nonetheless, the S&P 500 is headed towards a positive week and month, in part driven by better-than-expected earnings results for the first quarter. Meanwhile volatility remains subdued, with the VIX volatility index down over 25% this year*. • Inflation data continues to trend lower – The PCE inflation data in the U.S. for the month of March continued to move lower, both on a headline and core basis. Headline PCE inflation came in at 4.2% year-over-year, below last month's 5.1% reading, although slightly above consensus expectations of 4.1%. This is the ninth consecutive lower reading in PCE inflation since it peaked at 7.0% in June 2022. Core inflation also ticked lower, coming in at 4.6%, slightly below last month's 4.7% reading, but above expectations of 4.5%*. Overall, while the direction of travel has been positive, inflation remains elevated versus the Fed's 2.0% target. Given this is the Fed's last look at inflation ahead of their May 2-3 meeting, we believe this will keep the Federal Reserve on track for a 0.25% rate hike next week, bringing the fed funds rate to around 5.25%. This, however, may be the final rate hike before the Fed takes an extended pause to assess both the economy and inflation. • Earnings season rolls on – We are now about 53% of the way through first-quarter earnings season for S&P 500 companies. Of the companies that have reported, about 80% have delivered a positive surprise, above the historical trend of 73%. Earnings overall are on pace for about a -3.7% year-over-year growth rate, above the expected -7.0% growth that had been expected at the start of the year*. This week we have seen strong earnings reports from several notable mega-cap technology companies, including Microsoft, Google, Meta and Amazon. While the bar had been set high heading into earnings season because growth sectors have outperformed the broader S&P 500, these companies continue to deliver solid results and, in many cases, return value to shareholders through stock-repurchase programs. We have seen better-than-expected results across sectors as well, most notably in consumer staples, energy and materials, which have supported positive market performance year-to-date. https://www.edwardjones.ca/ca-en/market-news-insights/stock-market-news/daily-market-recap