Once again, the financial markets appear to be looking past the stalemate in the Middle East as both the United States and Iran continue the long process of a negotiated peace. There are several reasons for this, including a resilient American consumer (see Retail Sales below) which feed into robust corporate earnings fundamentals, the prevalence of a “buy the dip mentality” that has been in place for more than fifteen years, the perception that price hikes in oil are temporary and the expectations of an eventual deescalation or even better, a permanent end to the war. We left the most important reason for last and that is the strength that corporations have shown when reporting quarterly earnings. Should the current trend continue through the remainder of this earnings season, it will mark the sixth consecutive quarter that companies have posted double-digit year-over-year increases in their quarterly earnings. This has kept the downside limited during times of bearish news and investors hungry to buy on dips.
· The Open Market Committee (FOMC) of the Federal Reserve concluded a regularly scheduled two-day meeting this past Wednesday and, as expected, decided to leave interest rates where they are, in a range of between 3.50% - 3.75%. Of note was the fact that the last time four FOMC members dissented with the decision of the committee was in 1992. Of the four that dissented, one voted to lower the target range while three “supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time.” All in all, we consider this slightly hawkish.
· Although it appears as if the nomination of Kevin Warsh as the next Chair of the Federal Reserve is a done deal, in an unusual move, current Chair Jerome Powell said on Wednesday, that, as is his right, he will remain on the Board of Governors until the investigation into the renovation of the Fed’s headquarters “is well and truly over with transparency and finality.” Powell and President Trump have been at odds over the direction of interest rates for quite some time with Powell stating that Trump’s criticism of him is “unprecedented in our 113-year history.” (“Our” referring to a sitting chair of the Federal Reserve.)
· This past Thursday Meta Platforms (META) announced that it was laying off 10% of its workforce or approximately 8,000 people. This move was followed by a buyout offer to some 8,750 employees at Microsoft (MSFT), the first voluntary offering in its history. Many are wondering if this is just the start as Artificial Intelligence (AI) begins to become more widely adopted by business. According to an article published by Jenifer Elias on CNBC website, “as of this week, over 92,000 tech workers have been laid off so far in 2026, according to Layoffs. fyi, bringing the total to almost 900,000 since 2020.”
· Berkshire Hathaway posted an 18% y/y increase in profits during the first quarter under new CEO Greg Abel, who recently succeeded the legendary Warren Buffett. This, as the company’s cash hoard rose to a record $397.4 billion, $15.8 billion above the previous record of $381.6 billion set two quarters ago. Of note was the fact that Berkshire resumed repurchasing its own stock to the tune of $234.2 million during the previous quarter, its first such purchase since 2024. This occurred as the company was a net seller of $8.1 billion of equities within its portfolio.
· As noted last week, five of the Mag 7 stocks were scheduled to report earnings, which would test the durability of the rotation back into technology as well as the strength of the AI trade. These included Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMXN), Meta Platforms (META) and Apple (AAPL). Certainly, some earnings were better than others. Investors responded favorably to Alphabet, Apple, and Amazon and not so favorably to Microsoft and Meta. The concern voiced over Microsoft has been one that we have heard regarding many software companies. Does Artificial Intelligence (AI) pose an existential threat to the software as a service (SAAS) model? The concern surrounding Meta was the ability to reap a sufficient return on investment (ROI) for the hundreds of billions they are spending in capital and the impact of a slowing economy as they derive more than 90% of their revenue from advertising. We believe both are overblown and will most likely add to shares once the dust settles.
Economic Data That Drove Market Sentiment This Past Week…
· First Quarter Gross Domestic Product (advance estimate), as reported by the Commerce Department, a tally of the output of all goods and services in the United States, rose at an annualized rate of 2.0% (2.7% y/y), a substantially improvement from 0.5% recorded during Q4. Real Final Sales to Domestic Purchasers rose at an annualized rate of 2.5%, up from 1.8% during the fourth quarter. Government Spending (Government Consumption Expenditures and Gross Investment), rebounded 9.4%, from the prior quarter, in great part due to its reopening after the shutdown. The PCE Price Index rose at an annual rate of 4.5% during Q1, compared to 2.9% during the prior quarter. While the PCE Price Index Excluding Food and Energy rose at an SAAR of 4.3% during that same quarter. (Source, U.S. Bureau of Economic Analysis)
· The Bureau of Economic Analysis reported that Personal Income increased by 0.6% during March after remaining unchanged in February. However, after adjusting for inflation, Personal Income slid 0.1% during March, this after falling 0.4% in February. Consumer spending, or Personal Consumption Expenditures rose 0.9% (5.7% y/y), after climbing 0.6% during February. However, when adjusting for inflation, real consumer spending edged up by 0.2%. Inflation remains a key factor, as the PCE Price Index rose 0.7% for the month and by 3.5% year-over-year. The core index, which excludes volatile food and energy costs, rose 0.3% from the previous month and by 3.2% y/y. Amidst these shifts, the Personal Saving Rate slipped to 3.6% of disposable income, down from 4.0% in February.
· According to the Department of Labor, the Employment Cost Index, a “measure of quarterly changes in compensation costs, which include wages, salaries, and employer costs for employee benefits for civilian workers (non-farm private and state and local government)” rose by 0.9% during the first quarter, after rising 0.7% during Q4-2025. The ECI has risen by 3.6% y/y. The wages & salaries component (70% of ECI) rose by 0.8% during Q1 vs. 0.7% during Q4-2025 and as compared to 3.5% y/y. The cost of benefits rose by 1.2% during the previous quarter, after rising 0.8% during Q4-2025 and by 3.8% y/y. (Source, U.S. Bureau of Labor Statistics)
· Housing Starts rose 10.8% or by 146,000 to a seasonally adjusted annualized rate (SAAR) of 1,502,000 during March as compared to 1,356,000 in February (10.8% y/y). A study completed by Freddie Mac in 2018 estimates that there must be 1.6 million units build annually to account for household growth and to replace existing stock. During March, Single-family housing starts rose 9.7% or 91,000 to 1,032,000 from 941,000 (8.9% y/y). Meanwhile, Multifamily housing starts plunged 23.5% to 427,000 in March (-5.3% y/y) from 558,000 during February. Building Permits, a key barometer for future starts, fell 166,000 to 1,372,000 in March as compared to 1,538,000 during February (-7.4% y/y). (Source, U.S. Census Bureau)
Economic Reports scheduled to be released this week, include the following – on Monday, March Factory Orders; on Tuesday, March U.S. Trade Balance, February New Home Sales, March Job Openings and Labor Turnover Survey (JOLTS) and the ISM Services Sector Index; on Thursday, Initial Claims for Unemployment Benefits, March Construction Spending; March Consumer Credit and Q1 Productivity; and, on Friday, April Non-Farm Payroll Report, April Unemployment Rate, March Wholesale Inventories and the Preliminary Report on Consumer Sentiment from the University of Michigan.
Several potentially market moving companies are scheduled to report earnings, to include Palantir Technologies (PLTR), Advanced Micro Devices (AMD), Arista Networks (ANET), Eaton (ETN), Shopify (SHOP), Pfizer (PFE), Novo Nordisk (NVO), Disney (DIS), ARM Holdings (ARM), AppLovin (APP), Uber Technologies (UBER), McDonald’s (MCD), Gilead Sciences (GILD) and Toyota (TM).