Focus on Tech Earnings this Week

MACRO FRAME

Equity markets continue to remain sensitive to changes in oil prices and news flow ahead of a busy week of earnings. The Fed, European Central Bank, Bank of Japan, and Bank of England will all hold policy meetings, all are expected to maintain their respective policy rate.

STOCK INDEX FUTURES

US equity indexes are mixed, with the Dow and S&P little changed, while the Nasdaq moved higher ahead of earnings from five of the seven Magnificent Seven companies this week. Last week the S&P and Nasdaq hit record highs on a tech-fueled rally, setting up the stage for this week’s megacap tech earnings. The five names reporting this week (MSFT, META, GOOGL, AAPL, AMZN) alone represent roughly $15 trillion in market cap, more than the entire Russell 2000 plus Eurozone. With the S&P at a record, the index is priced for these five to deliver solid results, anything less and will likely see downwards price action. Focus around the earnings calls will also center around the outlook for capex, cloud growth, and demand from China. The path of least resistance is sideways-to-modestly-up if cloud growth holds and capex guides are maintained. The tail is to the downside, is a miss on cloud growth. Elsewhere, Axios reported that Iran gave the US a new proposal through Pakistani mediators on reopening the waterway and ending the war, with nuclear negotiations postponed for a later stage.

The June S&P is trading at 7,197.00, up 0.03% from Friday’s settlement of 7,194.75, within an overnight range of 7,171.50 to 7,208.50 — a fresh contract/52-week high overnight. Near-term support is seen at 7,171.50 (overnight low), then the 7,150 round number, with initial resistance at the 7,208.50 overnight/52-week high. SPX cash remains well above its 50-day moving average of 6,784.26 and above the 200-day at 6,707.10.

The June Nasdaq is trading at 27,481.00, up 0.17% from Friday’s settlement of 27,435.00, within an overnight range of 27,344.25 to 27,542.50 — also a new contract/52-week high. Near-term support sits at 27,344.25 (overnight low), then the 27,000 round number, with initial resistance at the 27,542.50 overnight/52-week high. NDX cash remains well above its 50-day moving average of 24,921.71 and above the 200-day at 24,711.61.

The June Dow is trading at 49,341, down 0.10% from Friday’s settlement of 49,392, within an overnight range of 49,229 to 49,385. Near-term support is seen at 49,229 (overnight low), then the 49,000 round number, with initial resistance at 49,385 (overnight high), 49,392 (prior settlement), the 50,000 psychological level, and the 52-week high of 50,937. DJIA cash remains above its 50-day moving average of 47,884.49 and above the 200-day at 47,085.36.

The VIX is trading at 18.94, up 0.23 points (+1.2%) from Friday’s close of 18.71, reflecting modest hedging demand into a heavy week of mega-cap earnings while ES and NQ press into fresh all-time highs. The reading sits in the middle of the moderate 15–20 band, suggesting market complacency has eased only slightly and arguing against an outright risk-off posture into the cash open.

Watch point: Five members of the mag seven report earnings this week, setting up a momentum test for markets amid the Hormuz disruption and likely bringing fundamentals back into price action. However, the US-Iran conflict will continue to dominate overall sentiment.

Watch point: Five members of the mag seven report earnings this week, setting up a momentum test for markets amid the Hormuz disruption and likely bringing fundamentals back into price action. However, the US-Iran conflict will continue to dominate overall sentiment.

CURRENCY FUTURES

US DOLLAR: The USD index is 0.21% lower to 98.33. Risk sentiment in the currency market got a lift following the Axios report that Iran offered the US a new proposal to reopen the Strait and end the war, though market euphoria remains largely muted. The Fed is likely to hold rates steady this week and signal that rates may need to stay higher for longer, a scenario that would be mildly positive for the dollar. However, money markets have already priced in no policy action for 2026 out of the Fed.

Positive developments regarding US-Iran negotiations are likely to put the dollar on the backfoot, while a continuation of the status quo could see the dollar trade sideways until there is further clarity on formal talks between the two countries. Underlying fundamentals make the case for a resumption of the dollar’s downward trend once the US and Iran are officially over. Despite rising inflationary pressures driven by energy prices, the dollar has lost its interest rate differential support it once drew from hawkish Fed expectations, support that has since been repriced away. With the labor market softening materially, the underlying case for a Fed rate cut later in the year remains intact.

Watch point: The dollar continues to find safe haven support and trade in line with oil prices. However, underlying macroeconomic fundamentals make the case for a resumption of the dollar’s downtrend when hostilities are over.

EURO: The euro moved 0.25% higher to $1.1751. The European Central Bank’s policy decision on Thursday is likely to be the key event for the euro zone this week, with the bank expected to leave rates on hold while policymakers assess the impact of higher energy prices on the economy. Money markets are currently priced for two rate hikes this year, while a Reuters poll of economists showed that over half of the respondents expect the bank to raise rates at its June meeting, in line with market-implied odds of a 61% chance of a hike. The euro is likely to continue trading opposite oil prices. Positive developments out of the US-Iran conflict will be supportive of the currency, while safe-haven demand would see flows to the dollar.

Watch point: A rate hike at the ECB’s April meeting is unlikely, while the case for tightening depends on the effectiveness of the ceasefire and duration of the rise in energy prices.

BRITISH POUND: Sterling is 0.30% higher at $1.3575. The Bank of England is widely expected to leave interest rates unchanged at its meeting on Thursday, leaving attention centered around the voting composition and the tone of the bank’s communication. Markets are currently pricing in two rate hikes from the BoE, though any indication of limited support for hikes at this meeting among policymakers could shift expectations toward just one additional increase.

Slowing wage growth remains a key factor which could limit the BoE to one rate hike, against market expectations. The critical watchpoint, however, is whether higher energy costs begin to feed into wage demands. While an April rate hike is unlikely, policymakers will be closely monitoring whether energy price strength is translating into broader wage pressure. Rate-hike timing expectations remain subject to the evolving conflict in Iran, and the situation continues to develop. Elsewhere, politics remain in focus for the currency as Prime Minister Keir Starmer continues to face growing scrutiny for his US ambassador appointment.

Watch point: While an April rate hike is unlikely, policymakers are likely to monitor data on whether higher energy prices are leading to bigger wages demands.

JAPANESE YEN: The yen strengthened 0.16% to 159.14 yen per dollar as investors finalize positions ahead of the Bank of Japan’s policy decision on Tuesday, where the bank is expected to hold rates steady. The BoJ is expected to raise its inflation outlook while lowering its growth forecast to account for the economic impact of the Middle East conflict. Governor Kazuo Ueda faces the challenge of reinforcing the bank’s commitment to gradual policy normalization to provide support for the yen. Last week’s data showed Japan’s core inflation accelerated for the first time in five months, rising to 1.8% in March from 1.6% in February, while headline inflation edged up to 1.5% from 1.3%. Markets have scaled back timing of a rate hike by the BoJ to September. Still, market-implied odds place a 50% chance of a hike at the June meeting.

The Yen has failed to hold a depreciation past the 160 level, as expectations of government intervention and eventual policy tightening offer support. However, a lack of policy-tightening at the bank’s meeting next week could see the yen routinely test the 160 level. The yen’s near-term trajectory remains hostage to geopolitical developments, a durable ceasefire could quickly unwind oil-driven inflation expectations and reduce urgency for BoJ action, though the bank is set to maintain its tightening bias.

Watch point: While an April rate hike is unlikely, confirmation of a near-term move upwards in policy could bring USD/JPY closer to 155, though geopolitical factors remain the main obstacle to appreciation against the dollar.

AUSTRALIAN DOLLAR: The Aussie is 0.60% higher to $0.7192 as US-Iran news lifted the currency. Focus will center around this week’s first-quarter inflation data on Wednesday. The economy was already near capacity before the conflict in the Middle East, wage growth continues to advance, and inflation expectations have risen modestly, setting up inflationary conditions ahead of Wednesday’s release. A modest upside surprise could be enough for the Reserve Bank of Australia to deliver a third interest rate increase this year.

Markets are pricing an 87% chance that the RBA will hike rates for a third time this year to 4.35% in May. Recent labor data showed employment rose in March, while the jobless rate remained low, firming support for a May rate hike. While a durable ceasefire would alleviate downside risks to growth and moderate inflation pressures, ongoing pass-through into broader prices is likely to keep the RBA on a tightening path.

Watch point: The RBA is likely to maintain its tightening bias amid persistent inflationary pressures.

TREASURY FUTURES

Yields are higher across the curve, with the 2-Year leading the move ahead of today’s $69B 2Y and $70B 5Y supply. Current levels: 3M 3.679% (−0.3 bps), 2Y 3.795% (+1.9 bps), 5Y 3.934% (+1.4 bps), 10Y 4.316% (+0.7 bps), 30Y 4.927% (+1.0 bps). The 2/10 spread stands at 51.90 bps (narrower from 53 bps prior session), the 5/30 spread is at 99 bps (essentially flat from 100 bps), and the 3M/10Y spread is at 64 bps (uninverted, 1 bp wider). The move is consistent with hedging pressure ahead of the 2Y/5Y/7Y trio this week and the FOMC policy decision on Wednesday.

This week will hold an FOMC decision, Q1 advance GDP, and March PCE data. With the Fed is expected to hold on rates, a hot PCE print this week would likely reinforce the Fed’s narrative of higher for longer, leaving policy well-positioned to respond to downward risks in the labor market. For the time-being, longer-run inflation expectations are offering resistance to higher yields as the Fed should remain biased towards policy-easing given weakness in the labor market. The spread between one- and two-year inflation swaps remains elevated, signaling that markets continue to expect the effects of higher energy prices to be transitory and should offer underlying support for bond prices, absent a drastic change in US-Iran hostilities.

Market expectations for Fed easing have been pushed farther out, though are still favorable to a dovish stance from the Fed. Markets are no longer pricing in any cuts for 2026, while seeing nearly a 44% chance for a cut in July 2027.

Watch point: Fed policy is poised to stand pat for the time-being, though a path to loosening remains open. Well-anchored inflation expectations should offer resistance to higher yields, while also supporting the case for Fed easing later in the year.

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