The S&P 500, up over eight percent this year, is wavering near all-time highs as the support from a stellar corporate earnings season gives way to macroeconomic pressures, including a key inflation reading due Thursday.
"Investors are moving beyond the earnings season, and the macro environment is starting to take more center stage," Anthony Saglimbene, chief market strategist at Ameriprise, said.
The 10-year Treasury yield touched its highest level since January 2025 this week, while first-quarter profits for S&P 500 firms are on track to jump more than 28 percent from a year ago, according to LSEG IBES data.
With the earnings buffer gone, the market is now highly sensitive to data that could force the Federal Reserve to maintain its restrictive policy, with futures markets now pricing in the possibility of a rate hike later in 2026.
Bond Yields Hit Multi-Year Highs, Capping Equity Upside
A selloff in the bond market has put Wall Street on edge as rising yields pressure stock valuations and increase borrowing costs for consumers and businesses. The 30-year Treasury yield also climbed to its highest level since 2007, a move that reflects growing investor concern about persistent price pressures.
"Inflation concerns continue to flare," said Jim Baird, chief investment officer with Plante Moran Financial Advisors. "You're seeing upside in long-term Treasury yields that is kind of challenging the bond market and probably puts a practical lid on equities broadly if it persists for some period of time."
PCE Inflation Data Looms as Key Test
The market's focus now shifts to a slate of critical economic data in the upcoming holiday-shortened week. The April Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, will be the most closely watched release on Thursday. The previous reading for the PCE Price Index was 3.5 percent year-over-year.
An update on first-quarter Gross Domestic Product and the latest consumer confidence print will round out the week's key data.
Minutes from the Fed's latest meeting, released this week, showed officials are growing more concerned that price spikes could stoke inflation, with a growing number open to the possibility that they may need to raise rates.
This article is for informational purposes only and does not constitute investment advice.
