Today is a big day for the American economy and markets. All investors' attention is focused on the release of two super important reports from the U.S. that may significantly affect sentiment and asset prices. Against this backdrop is the ongoing story of tariffs and trade wars, adding uncertainty.
What's on the agenda? Inflation and GDP
Later today we will see two key indicators:
Personal Consumption Expenditures (PCE) price index for March: This is the favorite inflation indicator for the Federal Reserve (the Fed). It is on this that the regulator relies when making decisions on interest rates. The PCE figures will indicate how successfully the Fed is combating rising prices and may hint at further steps in monetary policy.
Preliminary GDP estimate for the first quarter: This report is the main indicator of the overall health of the economy. It will show how fast the American economy was growing (or slowing down) at the beginning of the year.
Markets are holding their breath: this data will either confirm a "soft landing" and the possibility of rate cuts in the future or, conversely, indicate continued inflationary pressure or slowing growth, which could lead the Fed to act differently.
Tariffs and trade turbulence
The situation with tariffs imposed by President Trump on April 2 adds complexity to the picture. Tensions in the markets rose after we saw a frightening jump in the U.S. trade balance deficit for goods in March – to a record $162 billion! This is significantly above expectations.
Experts believe that such explosive growth in imports is the result of companies and even consumers trying to stock up on goods in advance, before the new tariffs take effect and raise prices.
Against this tariff pressure, the Trump administration is trying to smooth out sharp edges. For example, orders have been signed for tax breaks for the auto industry to offset some of the costs due to tariffs. Plus, there is positive news from other trade fronts: Trump hinted at a soon-to-be deal with India, and negotiations with Japan and South Korea seem to be going well. All of this is an attempt to reduce overall tension, but the effect of tariffs on the overall picture is still difficult to assess.
Markets today: Wait-and-see position
Market sentiment on Wednesday morning is cautious. Investors clearly do not want to make sharp moves ahead of the release of key data and a flurry of corporate reports.
Dollar and bonds: The situation is relatively stable. The yield on 10-year U.S. government bonds is holding around 4.17%, not far from its recent lows. The dollar index is also stable, trading at around 99.2. Both assets are essentially on pause, waiting for signals.
Stock futures: A slight decline in the morning – a classic sign of a "wait-and-see position" ahead of major events.
Attention to the tech giants' reports
In addition to macroeconomics, markets are closely monitoring corporate earnings. Today after the market closes, two heavyweights of the tech sector will report: Meta Platforms and Microsoft. Their results and forecasts could set the tone for the entire market, especially the Nasdaq index.
How important is the reporting? The example from Tuesday speaks for itself: shares of SMCI, a major server supplier (the company is popular amid the AI hype), collapsed by more than 15% after the release of preliminary results that turned out worse than expected. This shows how sensitive the market is to the financial health of companies, especially in rapidly growing sectors.
What happened yesterday: A slight optimism
It is worth noting that Tuesday on the American stock markets was quite positive. The main indices – Dow Jones, S&P 500, Nasdaq – showed growth, extending the series of gains for Dow and S&P 500 to six consecutive days. Part of this optimism was supported by the comments from the Secretary of Commerce about the proximity to a trade deal, which eased the situation somewhat.
Markets are now at a crossroads. Today's inflation data (PCE) and economic growth (GDP) from the U.S. are the main factors that will determine expectations for the Fed's actions and growth prospects. The impact of new tariffs is just beginning to manifest, adding uncertainty, even though the administration is trying to mitigate it. The reports from tech giants being released today could amplify or weaken this effect.
The coming hours promise to be filled with news, and how the markets digest all this information will set the tone for movements in the coming days. Be attentive!
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