U.S. stocks retreated from recent highs on Monday, with the S&P 500 slipping 0.17% to 7,153.03 by late morning. The pullback came after a powerful April rally that lifted the index about 13% since March 30, and the Nasdaq Composite surged over 19% in the same period. Investors are now turning cautious ahead of a crucial week packed with earnings from the largest technology companies and the Federal Reserve's interest rate decision.
Big Tech Earnings in Focus
Nearly half of the S&P 500's market capitalization is set to report quarterly results this week, including Microsoft (MSFT), Meta Platforms (META), Apple (AAPL), Alphabet (GOOGL), and Amazon (AMZN). According to FactSet, 28% of S&P 500 companies have already reported first-quarter earnings, with 84% exceeding analyst expectations. However, the forward 12-month price-to-earnings ratio for the index stands at 20.9, suggesting that high expectations are already priced in. Investors will be closely watching capital expenditure plans, particularly in artificial intelligence, to gauge whether the massive investments in chips, data centers, and cloud infrastructure will continue to pay off.
Oil Prices Surge Amid Supply Disruptions
Brent crude oil climbed 2.1% to $107.49 a barrel, driven by stalled U.S.-Iran peace talks and ongoing shipping disruptions in the Strait of Hormuz. Tamas Varga of PVM Oil Associates noted that between 10 and 13 million barrels per day are effectively missing from the global market. Goldman Sachs analysts, including Daan Struyven, warned that the economic risks extend beyond crude prices, citing high refined product costs, tight supplies, and the unprecedented scale of the shock. Higher fuel prices are squeezing consumers, airlines, and industrials, while also lifting inflation expectations.
Chip Stocks Lead the Charge
Chip stocks continued to outperform, with Intel (INTC) surging 23.65% on Friday after projecting stronger revenue. The Philadelphia semiconductor index extended its winning streak to 18 consecutive sessions. Advanced Micro Devices (AMD) and Arm Holdings both jumped about 14%, while Nvidia (NVDA) closed at a new record high.
Market Sentiment and Fed Decision
Milton Berg of Milton Berg Advisors remains bullish, projecting the S&P 500 could reach 7,639.69 within a year, with a median target of 8,499. Ben Carlson of A Wealth of Common Sense described the current surge as "the greatest American bull market of all-time," noting the index's 15% annual returns throughout the 2020s despite the pandemic, high inflation, rising rates, and geopolitical shocks.
However, some strategists are cautious. Joe Mazzola of Charles Schwab is watching for whether gains broaden beyond mega-cap tech and whether earnings can justify the upbeat mood. Nathan Peterson, also at Schwab, flagged the risk of a "sell on the news" move if stocks continue to climb, as investors may lock in profits. The Federal Reserve is expected to hold rates steady at its meeting on Wednesday, according to the Associated Press.
With the S&P 500's rally already stretched, any disappointment in earnings or a fresh spike in oil prices could trigger a sharper pullback. The coming days will be pivotal in determining whether the market can sustain its upward momentum.
