Carnival Over? U.S. Stocks’ “Strongest Earnings Season” Peaks, Three Major Macro Events Next Week May Trigger a U.S. Bond Storm

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As the first quarter earnings season draws to a close, U.S. stocks are shifting from an earnings-driven model to a sensitive phase dominated by macro variables. Inflation, oil prices, bond yields, and Federal Reserve policy expectations are once again at the core of market pricing.

From a market perspective, although the S&P 500 was volatile this week, it remains less than 1% from its all-time high and has risen over 8% so far this year. The strong performance of corporate earnings helped the market ignore rising yields, oil prices, and geopolitical risks for a time, but this buffer is diminishing.

Ameriprise Chief Market Strategist Anthony Saglimbene pointed out: "Earnings season is basically over." Investors are shifting their focus from earnings to the macro environment. With shortened trading hours next week due to the Memorial Day holiday, the market’s sensitivity to data may further increase.

The sell-off in U.S. Treasuries has raised market tensions. The 10-year Treasury yield hit its highest level since January 2025 this week, and the 30-year reached its highest since 2007. The upcoming releases of April PCE, revised Q1 GDP, and consumer confidence data next week will be key tests. Against a backdrop of elevated long-term yields and renewed talk of rate hikes, any unexpected inflation signals could further push up yields, putting pressure on stock valuations near historic highs.

Earnings Highlights Near End, Macro Risks Repriced

The main driver of this round of U.S. stock gains has been better-than-expected corporate earnings. According to LSEG IBES data, more than 90% of S&P 500 companies have reported results, with overall first quarter earnings expected to increase more than 28% year-on-year.

This allowed the market to digest the pressure from higher yields and energy prices for a period. Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren noted that expectations for earnings and economic growth are “quite high,” and that these expectations are reflected in current prices.

This is also the core issue the market faces now. The positive effects from earnings season are fading while stock prices remain elevated. If macro data shows inflation is stickier, or the rate path tilts more hawkish, U.S. stock valuations may need to be reassessed.

U.S. Treasuries Sell-Off Intensifies, Yields Set "Cap" for Stocks

The bond market is becoming the most direct source of pressure for U.S. stocks. Rising yields mean falling bond prices and suppress stock valuations, raising financing costs for consumers and businesses, and limiting risk assets.

Plante Moran Financial Advisors Chief Investment Officer Jim Baird said, inflation worries are still rising, and the climb in long-term Treasury yields is challenging the bond market and could set a practical "cap" on equities if it persists.

The main factors driving yields higher are inflation concerns and war-related increases in energy prices. If oil price and supply disruptions continue to be reflected in price data, expectations for the Fed to keep rates high or even raise them could intensify.

Three Key Macro Data Next Week, PCE Most Watched

The most important macro data next week will be Thursday’s April Personal Consumption Expenditures Price Index (PCE). As the Fed’s preferred indicator for its 2% inflation target, PCE is closely watched. Consumer and producer price indicators released earlier this month have generally run hot, increasing the risk that PCE will also move higher.

Ameriprise Chief Market Strategist Anthony Saglimbene said that PCE may be another signal of inflationary pressure, reflecting how high oil prices and supply disruptions in recent months are gradually feeding into inflation data.

In addition to PCE, the market will also see the latest estimate of first-quarter GDP growth and new consumer confidence data. These three indicators together will affect investors’ judgments on economic resilience, consumer pressure, and the rate path.

Currently, inflation worries are reshaping rate expectations. Futures markets are factoring in the possibility of the Fed raising rates in late 2026, whereas at the beginning of the year, the market was betting on a rate-cut path favorable for stocks.

The latest Fed meeting minutes released this week show officials are increasingly worried that price rises during the Middle East conflict could drive up inflation, and more officials are open to future rate hikes. Plante Moran Financial Advisors Chief Investment Officer Jim Baird said the more optimistic scenario is for rates to remain paused for longer; if inflation continues to rise, rate hikes could even return later this year.

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