Powell's final meeting, mega-cap AI spending guidance, and a Q1 GDP reality check converge in a pivotal week for US markets and Q2 outlook.

Key Highlights

  • Fed expected to hold rates at 3.50 to 3.75%; Powell's final meeting before his term ends May 15.
  • Microsoft, Amazon, Alphabet, Meta, and Apple report; AI capex guidance in sharp focus.
  • Q1 GDP forecast at 2.1%, though analysts flag temporary factors behind the rebound.
  • Core PCE expected at 0.3% month-on-month in March, limiting room for a Fed pivot.
  • Iran conflict, eighth week, keeps oil prices elevated and complicates the inflation outlook.

Federal Reserve: Powell's Final Act

The Federal Open Market Committee convenes Wednesday, with markets near-universally expecting no change to the federal funds rate, currently at 3.50 to 3.75%. The decision itself carries limited surprise potential. What warrants closer attention is the tone Chair Jerome Powell adopts in what is likely his final press conference before his term expires on May 15.

Powell faces a difficult communication task. Oil prices, elevated by geopolitical disruption linked to the Iran conflict, continue to cloud the inflation outlook. Core PCE has yet to convincingly recede toward the 2% target. Any dovish tilt risks being read as premature, while a hawkish stance invites questions about whether the Fed is overtightening into a slowing economy. The base case is a carefully neutral message: data dependence preserved, no forward commitment on timing, and optionality kept open for the incoming chair.

Earnings Season: The AI Spending Test

No single week of this earnings season carries more structural significance for equity markets. Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), and Meta (NASDAQ: META) report Wednesday. Apple (NASDAQ: AAPL) follows Thursday. Together, these five companies represent a substantial share of S&P 500 market capitalisation, and their capital expenditure guidance on artificial intelligence infrastructure has been a primary driver of technology sector valuations since 2023.

The central question is whether AI investment commitments hold firm against a more uncertain macro backdrop, or whether any pullback in spending guidance triggers a rerating of the broader sector. Softening tone from hyperscalers on data centre build-out plans would carry consequences beyond technology, affecting semiconductor suppliers, energy infrastructure providers, and cloud-adjacent software businesses.

Beyond technology, the earnings calendar is dense. Eli Lilly (NYSE: LLY) reports amid sustained investor focus on the GLP-1 drug category. Visa (NYSE: V) and Mastercard (NYSE: MA) provide early reads on consumer spending resilience. Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM) report against elevated oil prices. Merck (NYSE: MRK), Amgen (NASDAQ: AMGN), and AbbVie (NYSE: ABBV) update the large-cap pharmaceutical picture, while General Motors (NYSE: GM) offers a barometer for the US auto sector under ongoing tariff pressure.

GDP and Inflation: Data With Caveats

The Bureau of Economic Analysis releases its advance Q1 GDP estimate Wednesday. Consensus clusters around 2.1% annualised growth, a significant apparent acceleration from Q4's 0.5%. However, analysts attribute a portion of that strength to transitory factors, including a rebound in government spending and elevated software investment unlikely to persist into Q2. The composition of growth matters more than the headline number.

The March PCE report projects core prices rising 0.3% month-on-month, a modest deceleration from February's 0.4%. Personal spending likely increased 0.9% in the month. Neither figure, in isolation, is likely to shift the Federal Reserve's assessment materially, but together with the GDP print, the data will recalibrate market expectations for the second-half rate trajectory.

Supporting releases include durable goods orders, the ISM Manufacturing PMI, the advance goods trade balance, and the Q1 Employment Cost Index. Regional indicators, including the Chicago PMI and Dallas Fed Manufacturing Index, will be monitored for early signals of deteriorating business conditions.

Geopolitical Backdrop: Oil Risk Persists

The Iran conflict, now in its eighth week, remains a structural variable across asset classes. Elevated oil prices complicate Federal Reserve inflation management, compress consumer spending capacity, and introduce earnings risk for energy-intensive industries. Any credible diplomatic progress toward a negotiated framework would likely prompt a swift reassessment of both energy prices and broader risk sentiment. Markets currently price the conflict as persistent but contained. That equilibrium remains fragile.

The Week in Context

Rarely does a single week concentrate so much consequential information into so compressed a time frame. The Federal Reserve's policy posture, the direction of AI capital expenditure, the credibility of US GDP growth, and the trajectory of core inflation will all be materially repriced before markets close on Friday, April 30. Investors would be well served by preserving positioning flexibility ahead of what amounts to a significant multi-variable reset for Q2 market narratives.