Home Stretch. All good things must come to an end, including first-quarter earnings season—but not just yet. Investors are still waiting for some heavy hitters to report later this week, including Nvidia and Walmart.

There wasn’t much on the docket today, though, in terms of earnings or economic data. Stocks were mixed, with the Dow Jones Industrial Average up 0.3% while the S&P 500 lost 0.1% and the Nasdaq Composite closed 0.5% lower.

The Nasdaq’s decline may mirror some jitters ahead of Nvidia’s earnings, slated for Wednesday. Chip stocks in general faced their worst two-day decline since October, and big tech overall was the biggest drag on the market today.

Nvidia alone now accounts for around 8% of the S&P 500, so it’s no wonder that the company’s report is on everyone’s radar. Tech earnings have also been the main driver of EPS growth this quarter, and the fuel behind the broader market rally.

“Nvidia’s earnings are the ultimate test for a stock market that is not only trading at record highs, but one that also had a breathtaking bounce off of the March lows,” writes Richard Reyle, chief investment officer, Questar Capital Partners. “Nvidia is the market’s shorthand for everything AI and this market’s gains have been driven in large part by AI over the past few years.”

Walmart earnings are on the docket for Thursday, and while the world’s largest retailer has seen tremendous success in recent years, investors are looking at the report as a kind of alternate inflation print, hunting for clues about how customers are managing in the face of rising prices.

Overall, this earnings season has been a good one. The “strong results demonstrate that fundamentals remain supportive of equity markets, even as inflation risks remain near-term headwinds,” notes Brian Therien, senior analyst at Edward Jones.

Stocks may be taking a breath after recent record highs, but it’s not looking too worrisome just yet.

The Hot Stock: Dominion Energy +9.4%
The Biggest Loser: Regeneron Pharmaceuticals -9.8%

Best Sector: Information Technology +1.9%
Worst Sector: Materials -0.5%

Apart from earnings, interest rates could be a major focus for investors this week.

Wednesday will bring the the release of the Federal Open Market Committee’s minutes from the late-April monetary-policy meeting. It held rates steady at that meeting, the last one with Jerome Powell as chairman of the Federal Reserve, but the big question now is how long that will last.

A few months, ago the general consensus was that the Fed would start bringing rates down. But the Iran War and its impact on inflation has muddied that picture, leaving plenty of investors braced for potential rate hikes under incoming Fed Chair Kevin Warsh.

“Stronger‑than‑expected April CPI reinforces the case for patience, even as the new chair has expressed comfort looking through one‑off price pressures,” writes Christian Floro, market strategist at Principal Asset Management. “[P]olicymakers may hold off on cuts and keep policy unchanged longer than anticipated. For investors, the risk is rising that it will be 2027 before they see any further policy easing from the Fed.”

The stock market has largely been focused on AI to the exclusion of everything else, but inflation concerns are starting to show up in the bond market. At some point, that could bleed into stocks, as it did late last week.

That’s why some stock watchers think the Fed might have to adopt an even more hawkish tone to “convince bond traders that the Fed is ‘serious,’” writes Thierry Wizman, Macquarie Group’s global foreign exchange and rates strategist. “If that doesn’t happen, traders will conclude that the Fed is falling behind,” and the yield curve, already a concern for many, could steepen further.

Cava Group, Home Depot, Keysight Technologies, and Toll Brothers report quarterly results tomorrow.

The National Association of Realtors releases its Pending Home Sales Index for April. Economists forecast a 1.4% month-over-month increase, similar to the March gain. The PHSI is a leading indicator of housing activity, and measures housing contract activity for existing single-family homes, condominiums, and co-ops.

—Dan Lam

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