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The Federal Reserve's preferred measure of US inflation eased from multi-decade highs last month. US Core PCE Price index for March came in at 5.2%, lower than 5.3% February's print and analysts' expectations for March. In contrast, the employment cost index (ICE) for Q1 exceeded expectations coming in at 1.4%. The good news is that upward pressures on prices may be behind us, and now an important question is whether growth in futures prices will mean-revert to lower levels (2%) or will they remain at elevated levels. If it’s the latter, it may not provide too much optimism to stocks, whereas the former would reduce the uncertainty regarding Fed's tightening plans, and hence provide a more favourable environment for stocks.

The US economy unexpectedly contracted in the first quarter, dragged down by softer inventory growth, a persistent trade deficit, and to some extent by softer consumer spending. Gross domestic product fell at a 1.4% annualised rate (vs +1.1% expectations). Many analysts consider the print "misleading" as they state that the economy is still quite strong. But should coming economic data point to a softer growth, this could push the Fed to reconsider its monetary stance.

The deal was unanimously approved by the company’s board, and is expected to be completed later this year. Musk, the world’s richest person, secured USD25.5 billion of debt and margin loan financing and will provide about USD21 billion in equity to fund the deal. Investors will receive USD54.20 for each Twitter share they own. So far, Musk hasn't said publicly about what he will do to grow revenue.

It’s a big week for tech earnings and big tech profits will be pivotal for growth stocks. Of the 19% of the S&P500 that has reported so far, 77% are beating estimates. The U.S. consumer is holding up by some measures despite sticky inflation, but spending is shifting from goods to services as society re-opens. Overall demand is strong, though supply chain issues and cost pressures are hurting margins, a reason why many companies, so far, have decided to not raise their full-year outlook. 

Volatility from extreme expectations of rate hikes continues. Markets are also facing the prospects of more headwinds to global growth amid new Covid outbreaks in China. On Monday, markets are sent tumbling with the panic selling the greatest in China, with Shanghai stocks falling 5% and the Shenzen Composite Index dropping 6%. The CBOE Volatility Index, also referred to as the "fear index" surged to more than 29.5, a level last seen close to the March lows for major stock indices.