Volatility gripped the financial markets as investors dealt with the implications of hotter-than-expected inflation data, reigniting fears of further interest rate hikes by the Federal Reserve. The S&P 500 closed lower, extending its weekly decline, while the tech-heavy Nasdaq Composite experienced the largest selling pressure amid sustained concerns over elevated valuations. The broader market sentiment was one of caution and apprehension, as traders weighed the potential impact of persistent inflationary pressures on the central bank’s monetary policy trajectory. Investors balanced the latest economic indicators against forecasts and central bank signals, casting a shadow of uncertainty over the market’s direction as they brace for the Federal Reserve’s next moves.

Key Takeaways:

  • S&P 500 Faces Downward Pressure: The S&P 500 recorded a notable drop of 0.65% to close the week at 5,117.09, signalling investor unease ahead of the Federal Reserve’s impending policy meeting amidst persistent inflation concerns.
  • Dow Jones and Nasdaq Composite Also Decline: The Dow Jones Industrial Average fell by 190.89 points, or 0.49%, ending the session at 38,714.77. The Nasdaq Composite saw a steeper decline of 0.96%, closing at 15,973.17. Over the week, the S&P 500, Dow Jones, and Nasdaq registered losses of 0.13%, 0.02%, and 0.7%, respectively, illustrating a cautious market sentiment.
  • European Markets Close Higher Amid Inflation Data: In Europe, stocks bucked the broader trend, with the Stoxx 600 index closing 0.6% higher. The positive performance was underpinned by the release of February’s flash euro zone inflation data, which fell to 2.6%, slightly above expectations but still stoking investor optimism for potential rate cuts by the European Central Bank (ECB). Notable gains were seen in the technology sector, up 1.6%, while insurance stocks lagged, dropping 0.7%, reflecting the sector’s sensitivity to interest rate movements and their impact on investment portfolios.
  • Asian Markets Dip on US Inflation, China Housing Slump: Asia-Pacific markets were broadly lower on Friday. Hong Kong’s Hang Seng plunged 1.5%, and Mainland China’s CSI 300 reversed losses to close 0.22% higher. Japan’s Rengo union said the country’s biggest firms will see the sharpest wage spike in over 30 years, even as the Nikkei 225 slipped 0.26%. South Korea’s Kospi closed 1.91% lower, while the small-cap Kosdaq fell 0.8% to 880.46. Separately, China’s housing slump persisted, with new home prices down 0.3% month-on-month in tier-1 cities like Beijing despite mortgage rate cuts, falling 1% year-on-year. Prices dropped 0.3%-0.4% in lower-tier cities. 
  • Oil Prices Exhibit Weekly Gains: Despite a slight dip on Friday, crude oil futures secured a weekly gain, highlighting expectations for a tightening crude market. West Texas Intermediate for April settled at $81.04 a barrel, and Brent crude for May at $85.34 a barrel, both marking over 3.5% increases for the week.
  • McDonald’s Operations Impacted by Global Tech Outage: A technology outage temporarily halted McDonald’s operations in several countries, including Japan, though shares only saw a modest decline of about 0.4% on Friday.
  • Property and Retail Sectors Face Challenges: Vonovia’s shares plummeted by over 7% after reporting a substantial annual loss, spotlighting the European real estate crisis. Similarly, British electronics chain Currys faced investor pullback with JD.com exiting takeover talks, pushing shares down by 3.90%.

FX Today:

  • EUR/USD Navigates Lower Amid USD Strength: The EUR/USD pair experienced downward pressure, trading around a one-week low at 1.0885. The pair is closely watched as the ECB is anticipated to be the first among major central banks to cut interest rates, potentially starting in June. Meanwhile, a delay in the Fed’s rate cut expectations from June to July has added to the bearish sentiment surrounding the EUR/USD.
  • EUR/GBP Tests Key Support Levels: The EUR/GBP pair finds itself under strain, trading just above the 0.8500 mark. The currency duo has slipped below all three simple moving averages, setting sights on the critical support area around 0.8490. Should this level give way, it could pave the path to 0.8340, marking a significant downturn. Conversely, any attempt at a rebound seems capped by the immediate resistance near 0.8550 in the short term.
  • GBP/USD Struggles Ahead of Central Bank Meetings: GBP/USD has struggled to break convincingly above the 1.2830 resistance level, with the fundamental picture suggesting a potential higher point, but technical indicators pointing to selling pressure on approaches to the psychological 1.2800 resistance area. The pair’s movements are closely watched ahead of policy decisions from the Bank of England and the Federal Reserve.
  • AUD/USD Remains Bearish: The Australian dollar against the US dollar (AUD/USD) continued its downward trajectory, finding interim support around the 0.6580 level, coinciding with the 200-hour Simple Moving Average (SMA). A bearish crossover between the 50-hour and 200-hour SMAs hints at prevailing negative sentiment, with the pair struggling to reclaim higher ground after a brief early-week rally fizzled out.
  • USD/CAD Remains Steady as Focus Shifts to Federal Reserve: The USD/CAD pairing lingered on the upper edge of the 1.3500 threshold throughout the day, touching an early peak near 1.3550. Despite attempts, sellers were unable to drive the pair beneath the 1.3510 mark. The currency duo encountered a near-term supply zone anticipating a possible retraction to around 1.3460, while efforts to breach a crucial resistance level near 1.3550 faced challenges, indicating a tight consolidation phase as the market braces for the Fed’s forthcoming announcements.

Market Movers:

  • Adobe Faces Downward Pressure on Revenue Forecast: Adobe Inc. (ADBE) experienced a sharp decline of more than 13%, making it one of the leading losers in the Nasdaq 100. The drop came after the company projected Q2 revenues between $5.25 billion and $5.30 billion, slightly below the market consensus of $5.31 billion, triggering worries about its growth trajectory.
  • Tech Giants Experience Setbacks Amidst Market Uncertainty: Prominent technology firms including Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT) closed down more than 2%, contributing to the broader market pullback. Alphabet Inc. (GOOGL), Apple Inc. (AAPL), and Meta Platforms Inc. (META) also recorded losses exceeding 1%, reflecting the sector’s vulnerability to shifting market sentiments.
  • Madrigal Pharmaceuticals Leaps on FDA Approval: Madrigal Pharmaceuticals Inc. (MDGL) enjoyed a surge of more than 10% after securing FDA approval for its Rezdiffra drug, showcasing the impact of regulatory milestones on biotech and pharmaceutical companies’ valuations.
  • Jabil Takes a Hit After Earnings Forecast Cut: Jabil Inc. (JBL) led the downturn in the S&P 500, plummeting over 16% following a revision of its full-year core EPS forecast down to $8.40 from an initially projected figure above $9.00. This adjustment fell significantly below the consensus estimate of $8.99, sparking investor concern over the company’s future profitability.
  • Ulta Beauty Dips Despite Sales Beat: Ulta Beauty Inc. (ULTA) saw its shares fall by more than 5% even after reporting Q4 net sales of $3.6 billion, surpassing the consensus expectation of $3.523 billion. The decline was attributed to the results not meeting the “even more bullish expectations” set by some market observers.
  • Chip Manufacturers Weighed Down by Market Reports: The semiconductor sector faced headwinds, with ON Semiconductor Corp. (ON), ASML Holding NV (ASML), and NXP Semiconductors NV (NXPI) closing down more than 2% following reports of the Chinese government urging EV makers to increase purchases from local chip manufacturers.
  • Costar Group Surges After Legal Settlement: Costar Group Inc. (CSGP) emerged as a top performer, climbing more than 8% in the S&P 500 and Nasdaq 100 after settling litigation with the National Association of Realtors for $418 million, a move that potentially clears a major legal hurdle for the company.
  • Energy and Automotive Sectors Find Bright Spots: Valero Energy Corp. (VLO) and Stellantis NV (STLA) saw upticks of more than 3% following positive analyst upgrades, highlighting pockets of resilience within the market. Rivian Automotive Inc. (RIVN) also gained over 3% after an analyst upgrade, underscoring investor confidence in specific industry segments despite broader market challenges.

With the S&P 500 and other major indices charting losses amidst rising inflation concerns, the spotlight turns to the Federal Reserve’s upcoming policy meeting for potential cues on future monetary direction. Technology stocks have taken a hit, reflecting broader uncertainties and sector-specific challenges. Meanwhile, global markets respond similarly, with mixed performances across Asia and notable movements in commodity prices. The unfolding scenario shows the fragile balance that markets maintain in the face of economic data, central bank policies, and geopolitical tensions, with investors keenly waiting for insights that may define the course of the coming weeks.