Stock markets climbed on Friday, capping their strongest weekly performance this year. This surge was driven by positive remarks from tech giants Microsoft and Alphabet (Google’s parent company), who assured investors that their substantial investments in Artificial Intelligence (AI) are yielding positive results. 

Inflation Data Overlooked by Investors 

Despite encountering higher-than-expected inflation data, investors seemed undeterred. Some traders had braced for even steeper inflation figures, given recent indications that the Federal Reserve is struggling to curb inflation. Consequently, the latest inflation numbers did not provoke significant market unrest. 

Bond Yields, Currency Trends, and Gold Prices

Government bond yields showed mixed performance, with longer-term maturities outperforming shorter-term ones. The ten-year Treasury note’s yield fell by about 3 basis points to 4.663%. 

The Bloomberg Dollar Spot Index strengthened, while the Japanese yen depreciated by 1.4%, approaching 158 yen to the dollar. This depreciation has led investors to watch for potential interventions by Japanese authorities closely. 

Alongside these shifts, gold prices edged higher, reflecting investors’ ongoing interest in safe-haven assets amid fluctuating market conditions. 

Weekly Market Wrap-Up 

Over the week, the S&P 500 advanced by 2.7%, the tech-heavy Nasdaq Composite by 4.2%, and the blue-chip Dow by 0.7%. 

Closing levels on Friday, April 26^th, 2024: 

Index	Last	Change	%Change
DOW JONES	38239.66	+153.86	+0.40%
S&P 500	5099.96	+51.54	+1.02%
NASDAQ	15927.90	+316.14	+2.03%
U.S. 10Y	4.663%
VIX	15.37	-0.34	-2.21%

Market Reflections and Outlook 

Just last week, markets were teetering on the edge, with fears of a potential meltdown looming. However, the market rebounded, defying expectations. The bounce from the S&P 500’s 100-day moving average suggests it might now serve as a support level. 

Two main theories could explain the market’s resilience. First, the market might have been oversold, making the rebound a natural response. Secondly, the market seems to be less concerned with persistent inflation as long as the Federal Reserve does not plan additional rate hikes. 

Consumer spending data also indicate that the economy might continue to grow despite higher interest rates. Additionally, spurred by announcements from Alphabet and Microsoft about gains from AI-related revenue, investor enthusiasm has spiked. 

Future Market Movements 

The big question remains: Will the rally continue? It’s uncertain. If the rebound was merely a correction from oversold conditions, a retraction might follow. Alternatively, if the market’s momentum is driven by FOMO or indifference to economic data and Fed actions, buying could resume, potentially testing new highs. 

With a Fed meeting on the horizon, it’s uncertain how their statements will impact the market. What is clear, however, is that volatility is likely to persist, so investors should brace for potentially significant market moves. 

Source: CBOE, Bloomberg 

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable U.S. bank exceeding 20 years. 

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