Week Ahead – Looking Forward, & Glancing Back. Earnings Accelerating

Looking ahead to next week, earnings seems to be near the top of most market followers' lists of most important aspects to follow. Before we dig into next week, let's take a quick glance through the week gone, to see what we can learn and take from it.

Last Week In Short – The week commenced under the cloud of the U.S. Commerce Department's Gross Domestic Product (GDP) report released on April 25, which painted a picture of slow economic growth besieged by ascending inflationary pressures. Economic stagnation laced with inflation initially sent the stock market tumbling, evidenced by a 700-point drop but the markets fought back through the same day. Although the markets rallied from this dip, the data underscored the tensions between economic performance and price stability.

Despite these challenges, market indices managed to close out the week on a positive note. The Dow Jones Industrial Average climbed 0.7%, while the S&P 500 and Nasdaq Composite Index benefited from solid growth of 2.7% and 4.2%, respectively. This uplift can be credited to notable gains from heavyweight tech players like Nvidia, Alphabet, and automotive and energy titan Tesla, but there were a lot of winners on the week.

Looking Ahead – A key focus for the coming week is the impending April jobs report, which is projected to maintain the unemployment rate at 3.8% and feature payroll growth in the ballpark of 240,000 positions. Alongside this, analysts and investors are eyeing Thursday's Commerce Department report concerning first-quarter economic productivity, anticipated at a consensus estimate of an increase of 1.8%.

The pace of earnings season accelerates with 170 S&P 500 companies set to report this week, including heavyweight titans such as Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), and Warren Buffett's conglomerate Berkshire Hathaway (NYSE: BRK.B). An update from these market giants is particularly noteworthy, as their performance can significantly sway market sentiment and sector-specific outlooks.

The US will also see earnings updates from iconic food and beverage companies such as Coca-Cola (NYSE: KO), Kraft Heinz (NASDAQ: KHC), McDonald's (NYSE: MCD), and Starbucks (NASDAQ: SBUX). These reports will deliver not just financial metrics but insights into consumer discretionary spending and the impact of inflation on both costs and price points at consumer levels.

Mastercard, Eli Lilly, Pfizer, and semiconductor favourite AMD are other names on the earnings calendar you might want to mark out.

Market analysts have highlighted that earnings growth expectations have ticked up, standing at a solid 5.3% year-over-year. This figure gestures toward a certain resilience in corporate America, suggesting that many companies have successfully navigated the headwinds that challenged profitability over the past year.

Simultaneously, S&P 500 firms have, on the whole, continued to outperform analyst expectations in the first quarter. This trend provides a degree of optimism for investors as they parse through the latest data dumps for signs of sustained growth or emerging vulnerabilities.

Looking elsewhere on the week, earnings are not confined to US markets, with internationally listed companies around the globe also reporting in greater numbers.

Adding to the global earnings feast, tech giant Samsung (KRX: 005930), European automakers Volkswagen (ETR: VOW3) and Daimler, China's electric car manufacturer BYD, banking giant HSBC, Biome Technologies, Elementis, and Howden Joinery will also unveil their financial performances. The diversity of industries, geographies, and business models represented in these reports adds both depth and breadth to the global economic picture being pieced together through this earnings season.

Corporate earnings might look to dictate the week on paper, but it will likely be economic data that drives the broader sentiment.