Stock Market Faces May Uncertainty as Earnings and Jobs Data Loom
As May begins, investors brace for a critical week of tech earnings reports and the April jobs report, with the stock market facing seasonal headwinds and concerns that the Fed will maintain higher rates longer than previously expected.
Weak Jobs Growth Expected Ahead
The U.S. economy is expected to have added just 50,000 jobs in April, far below the prior blowout reading of 178,000, according to FactSet consensus estimates, with the unemployment rate expected to have held steady at 4.3%.
Tech Earnings and AI Capital Spending in Focus
AI investment is expected to drive roughly 40% of S&P 500 earnings growth this year, with the largest cloud computing companies planning to spend an estimated $670 billion in 2026. The shared question across all four major tech company earnings calls is whether AI capital expenditure is being matched by revenue growth at sufficient speed, as Alphabet guided $175–185 billion in 2026 capital expenditure, approximately double 2025 levels, and Meta's full-year 2026 capex plan was nearly double its 2025 spend.
Rate Cuts Unlikely Near Term
The latest Federal Reserve meeting suggested a reduction isn't in the cards anytime soon, after three dissents on the policy statement showed a lack of support for an "easing bias," and markets have adjusted their expectations with little likelihood of a reduction coming until well through next year.
Seasonal Risk Offset by Strong Valuations
JPMorgan's trading desk found that the S&P 500 has averaged a return of 1.5% in May, with a 1.9% pop in June over the last 10 years.