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Stocks rose to fresh records last week as AI optimism lifted tech stocks.
Credit: CHARLY TRIBALLEAU / AFP via Getty Images

Key Takeaways

• Artificial intelligence has once again propelled the stock market to record highs, with investors looking past uncertainty about the Middle East to focus on Big Tech's AI spending and strong earnings growth.
• The speed of the rally has alarmed some experts worried about over-confident investors chasing momentum trades, and revived concerns about an AI bubble.

The mantra on Wall Street these days: Keep calm and carry on buying tech.

There’s still next to no oil coming out of the Persian Gulf, and U.S.-Iran peace talks have sputtered. Not much progress has been made to end the conflict that's caused the worst oil supply shock in history. Yet stocks are at record highs, with the S&P 500 up 13% since late March and the tech-heavy Nasdaq trading 18% higher.

You can thank AI for that. Stocks in the tech sector, which is on track to grow earnings about 30% this year according to Alicia Levine, head of investment strategy and equities at BNY Wealth, are powering higher: As of Monday, the PHLX Semiconductor Index (SOX), has advanced in 18 consecutive sessions, rising nearly 50% in that time. Memory stocks that lost their blistering momentum last month have regained it in spades; Sandisk (SNDK), Western Digital (WDC), Micron (MU), and Seagate Technology (STX) are all up between 45% and 70% in the last month. 

Why This Matters

Big Tech earnings reports have repeatedly shifted sentiment around AI stocks on Wall Street in recent years. The four largest hyperscalers are all slated to report earnings this week in a possible test of an AI-fueled rally that's taken stocks to record highs despite a stalemate in the Middle East.

The Magnificent Seven, shares of which languished throughout the first quarter, are also back with a vengeance. Nvidia (NVDA) reclaimed a $5 trillion market capitalization last week. Shares in Nvidia, Alphabet (GOOG), Amazon (AMZN), and Meta (META) are all up more than 20% in the past month. Broadcom (AVGO), not officially in the Mag 7 but carrying a larger market value than Meta and Tesla (TSLA), is up 30%. 

“It’s no secret that the economy is going to feel higher oil prices in inflation in the next few months,” Levine told CNBC on Monday. “But the growth is so spectacular on the other side of the equation, which is essentially what the equity market is levered to, and that’s why the equity market is moving higher.”

The fervor of the rally has set off alarm bells, with some commentators wondering whether a risky bubble is filling again. Rather than dipping their toes into the water after March’s slump, investors have jumped back in to the most volatile stocks, according to Jeff DeGraaf, chairman and head of technical research at Renaissance Macro. As a result, high beta stocks—those seen as being more volatile than the broader market—are outperforming low beta by a margin reminiscent of the Dotcom Bubble, and that’s not typical of sustainable rallies, says deGraaf.

“We’re playing because the music’s playing," he said. "But there’s a lot of questions about it.”

To be sure, some analysts see reason, not irrational exuberance, in the stock market. The recent rally “reflects a squeeze higher in positioning after it was starkly disconnected from the exceptionally strong earnings growth we expected" for the first quarter, wrote Deutsche Bank analysts on Friday. Despite the surge, investor positioning is “only modestly overweight” and “has plenty of room to keep grinding higher,” they said.

Investors have returned to the bubble question repeatedly over the past couple of years as they’ve watched the sums being spent on data centers balloon. The hyperscalers—Microsoft (MSFT), Alphabet, Amazon, Meta, and Oracle (ORCL)—are expected to spend nearly $700 billion on capital expenditures this year, a more than 60% increase from last year. 

Skeptics draw parallels between data centers today and the telecommunications infrastructure laid in the 1990s, when telecoms built the backbone of the Internet in anticipation of demand that materialized much more slowly, and with less effect on growth and profits, than expected. Today’s bears warn that the hyperscalers, too, will be left holding the bag if the economics of AI aren’t what they predict. 

Bulls point to the hyperscalers’ strong finances and evidence of AI’s financial benefits. Productivity is increasing in “high-AI exposure” industries, according to a recent Morgan Stanley note. There’s also been a step-up in the number of companies offering concrete examples of AI-driven efficiencies. One quarter of S&P 500 companies mentioned at least one quantitative benefit from AI on their earnings calls in the first quarter of this year, up from 13% a year ago.

Wall Street veterans have seen all this before. In the 1990s, struggling companies of all sorts saw their share prices skyrocket after they tacked “.com” onto their names. Some companies that survived the Dotcom Bubble have been slogs for their investors. And yet sometimes things can work out—eventually. Intel (INTC) and Cisco (CSCO) last week both closed at record highs for the first time since 2000.

The balance of AI’s costs and benefits will be in focus on Wednesday, when Alphabet, Microsoft, Amazon, and Meta are all slated to report quarterly results. “This is a ‘show me’ quarter,” said King Lip, chief strategist at BakerAvenue, on CNBC last Friday. “The AI spend has to earn its keep.”

Western Digital, Seagate, and Sandisk are some of the best-performing stocks in the S&P 500 this year.
Credit: Getty Images

Key Takeaways

• Sandisk, Western Digital, and Seagate are all set to report earnings this week.
• Strong results and signs of growing spending on AI hardware from Big Tech firms could add to recent enthusiasm for the shares.

It's been a great year for memory and data storage stocks. Earnings could make it even better.

Hard drive maker Sandisk's (SNDK) stock, which has more than quadrupled in value since the year began, is the S&P 500's top performer for 2026. Western Digital (WDC) and Seagate (STX) have doubled over the same period, putting them among the top 10. The trio is set to report earnings over the next few days, with analysts expecting strong results that could add fuel to a blistering rally that's sent all three stocks to all-time highs this month. Over the last 12 months, Seagate's stock is up an eye-watering 600%, while Western Digital has surged close to 900%, and Sandisk has soared over 3,000%.

The stocks could also get a lift from America's biggest tech companies, which have shelled out on hardware to support their AI ambitions. Earnings due this week from many of the Magnificent Seven's big spenders—including Amazon (AMZN), Meta (META), Microsoft (MSFT) and Google parent Alphabet (GOOGL), and Apple (AAPL)—which could reveal growing commitments to AI spending, could also be taken as a strong signal for future demand. Investors have lately been enthusiastic about AI stocks broadly, which could provide an additional tailwind.

There is "fundamental upside for the entire memory/storage complex," Goldman Sachs analysts wrote ahead of the results.

Why This Matters to Investors

Some investors may be wondering whether data storage stocks still have room to rise after their red-hot runup. A strong earnings showing from the companies, seen as "pick-and-shovel" AI plays, could add fuel to their rally, along with signs of rising AI spending by Big Tech.

Seagate will be the first of the three to report, with its earnings due after the closing bell on Tuesday. Western Digital and Sandisk are set to follow Thursday afternoon. More details on AI spending commitments from Amazon, Meta, Microsoft and Alphabet could come Wednesday. Apple, which counts Western Digital and Sandisk among its suppliers, is due to report Thursday.

Seagate, Western Digital, and Sandisk are all seen reporting rising revenue and profits on the back of booming demand and higher prices amid a global shortage of memory and data storage components. Analysts at Bank of America see all three companies topping Street estimates. Goldman Sachs analysts said they would be watching for color on the companies' plans to boost supply.

In a note to clients earlier this month, Morgan Stanley analysts named Seagate their "top pick" in IT hardware, given expectations that Seagate may have more room to rise than its peers, though they expect data storage makers to broadly benefit from a shortage of data storage hardware, which is seen lasting through 2028.

Most analysts surveyed by Visible Alpha have "buy" ratings for the stocks, though they've already pulled well ahead of Wall Street's mean target prices with their recent gains.

Qualcomm shares have gained 20% over the past three weeks but remain down since the start of the year.
Credit: Joan Cros / NurPhoto / Getty Images

Key Takeaways

• Qualcomm is reportedly in talks with OpenAI as a potential supplier for a smartphone the ChatGPT maker is developing.
• Qualcomm shares have rallied recently amid a strong stretch for tech stocks after concerns about a potential decline in smartphone sales pressured its outlook.

Qualcomm is reportedly in talks to partner with OpenAI on a chip for a smartphone project.

Tech analyst Ming-Chi Kuo wrote Sunday that Qualcomm (QCOM) is co-developing a chip that would be used in a smartphone developed by OpenAI. Qualcomm shares have rallied recently, including an 11% surge Friday, when a strong earnings report from Intel (INTC) lifted a number of hardware stocks.

Qualcomm stock has recovered some of the losses suffered earlier this year, when concerns about a memory shortage hampering demand for smartphones pressured the chipmaker's outlook, as it is a major supplier of smartphone processors.

The stock was little changed in early-afternoon trading Monday, after rising as much as 8% in the opening minutes of the session. Despite gains in recent weeks, Qualcomm shares have lost roughly 13% of their value since the start of 2026.

Why This Matters to Investors

Adding new customers like OpenAI could help insulate Qualcomm's business from a potential pullback in smartphone sales.

Kuo wrote that OpenAI is collaborating with Qualcomm, along with MediaTek and Luxshare, to finalize the hardware and manufacturing plans by late this year or early 2027, with a device expected to enter production in 2028. OpenAI has long been developing other lines of business aside from ChatGPT, including a potential smartphone or wearable device.

Qualcomm and OpenAI did not respond to requests for comment on the reported partnership in time for publication.

Qualcomm executives could face questions from investors and analysts about the report when the company releases its quarterly results after the closing bell on Wednesday.

Shares of bankrupt airline Spirit have soared 600% since reports emerged of a possible government lifeline.
Credit: Eva Marie Uzcategui / Bloomberg / Getty Images

Key Takeaways

• The federal government could be considering deals with more than one low-cost U.S. airline, with a group of carriers reaching out to the Trump administration about a multibillion-dollar aid package.
• Shares of bankrupt airline Sprit extended their recent climb as investors continued to bet on the possibility that the government could take a stake in the company.

The federal government could be considering deals with more than one low-cost U.S. airline as carriers contend with rising fuel costs.

A group of airlines has asked the Trump administration to consider creating a $2.5 billion "liquidity pool" intended to offset the rising cost of fuel "as a necessary and targeted measure to stabilize operations and keep airfares affordable during this period of volatility," according to a Monday statement from the Association of Value Airlines, news of which was first reported by The Wall Street Journal. The Washington, D.C., based AAVE's members include Allegiant (ALGT), Sun Country (SNCY), Frontier (ULCC), Spirit (FLYQQ) and privately owned Avelo. Monday's news report follows ongoing coverage regarding the possibility of a government stake in Spirit, which is currently restructuring after filing for bankruptcy in August.

The AAVE's statement said participating airlines "may be required" to issue warrants to the government, which could convert into equity stakes. "Temporary government support to preserve vital industry competition is not without precedent," the group said.

“The White House is aware of outreach that was made by a group of budget airlines to the Department of Transportation, and the Administration continues to monitor the health of the U.S. aviation industry for passengers and airline employees," White House spokesman Kush Desai said in a Monday statement. The AAVE said it met with Transportation Secretary Sean Duffy last week.

The news extended recent interest in shares of Spirit, which finished Monday up 17%, retreating from intraday highs but holding above levels reached last week on the back of previous news coverage. (Trading shares of companies in bankruptcy is a risky strategy, since holders of such stock are generally seen as subordinate to the holders of bonds or preferred shares in bankruptcy proceedings.) Shares of Frontier finished 2.5% lower on a modestly positive day for U.S. stocks. (Read our full coverage of today's trading here.) Shares of Sun Country and Allegiant, which plan to merger later this year, edged higher. The JETS exchange-traded fund, which includes airline shares, finished down 1.8%.

Avelo said through a spokesperson that "we emphatically agree that a healthy airline industry with strong competition is important to the U.S. economy, especially during this period of high fuel prices."

Airlines are contending with higher fuel prices associated with the U.S.-Iran conflict, which has pushed oil prices higher, affecting consumers—in the case of air travel, that has meant both higher ticket prices and increased bag fees— but also businesses that rely heavily on fuel.

"The operating backdrop shifted rapidly this quarter," Alaska Air (ALK) CEO Benito Minicucci said earlier this month on a conference call, according to a transcript provided by AlphaSense. "Sharply higher fuel prices, driven by geopolitical events, created uncertainty across global markets and meaningful pressure on the airline industry."

It's also meant some airlines have explored or already moved to cut capacity. Some airline executives believe higher airfares could weigh on demand later this year.

"Surging jet fuel prices will lead to a slowing of global airline capacity deployment, with groundings a possibility among the financially weakest operators," Deutsche Bank analysts wrote Monday.

UPDATE: This article has been updated since it was first published to add new comments and market data.

News of the day for April 27, 2026

The S&P 500 and Nasdaq Composite have hit a series of record highs recently.
Credit: Charly Triballeau / AFP / Getty Images

Stock futures are little changed Monday as investors await more news on Iran and look ahead to a packed week of potentially market-moving events; oil futures are back on the rise after U.S.-Iran peace talks were scrapped over the weekend; investors are awaiting quarterly results from most of the Magnificent Seven tech giants this week, as well as a Federal Reserve decision on interest rates; Chinese regulators are looking to block Meta's acquisition of an AI start-up; and discount airlines are reportedly pitching the Trump administration on a $2.5 billion assistance package to combat high fuel costs driven by the Iran war. Here's what you need to know today.

Stock Futures Little Changed After 4 Weeks of Gains for S&P 500

Stock futures are little changed this morning ahead of a busy week of earnings, as the weekend passed by without any significant news on an Iran peace deal. Futures tied to the tech-heavy Nasdaq were up 0.2% recently, while S&P 500 futures rose fractionally and those linked to the Dow Jones Industrial Average slipped 0.1%. The S&P 500 and Nasdaq closed at record highs on Friday, boosted by a big rally in chip stocks, and have posted solid gains for four consecutive weeks. Crude oil futures were rising after peace talks with Iran were scrapped over the weekend (more on that below). Gold futures were down 0.5% at $4,720 an ounce, while bitcoin was trading at $77,800 after rising as high as $79,500 overnight. The yield on the 10-year Treasury note held steady at 4.31%.

Oil Rises After Weekend Iran Peace Talks Scrapped

Oil prices are on the rise this morning as the Iran war has dragged into another week, with the Strait of Hormuz remaining closed. West Texas Intermediate futures, the U.S. crude oil benchmark, were up 0.8% recently at $95.15 per barrel, after rising as high as $97.10. Peace talks that were expected to take place were called off over the weekend before U.S. officials had left for Pakistan. President Trump said last week that the ceasefire between the U.S. and Iran will be extended indefinitely, until Iranian officials can agree on and submit their latest proposal to end the war. A recent proposal included Iran pitching an end to its closure of the Strait of Hormuz with the condition of the U.S. also backing off of its blockade of Iranian ports, in a deal that would not include changes to Iran's nuclear program, per The Associated Press.

Massive Week of Earnings, Fed Rate Decision Ahead

Investors have a lot to look forward to this week, from earnings reports from most of the Magnificent Seven to what is likely to be Federal Reserve Chair Jerome Powell's last meeting leading the central bank. The Fed's policy committee is scheduled to meet Tuesday and Wednesday, with a decision on whether to adjust interest rates and a press conference from Powell scheduled for Wednesday afternoon. Mag 7 members Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META) and Microsoft (MSFT) headline the earnings release calendar. Other noteworthy companies scheduled to release results include Starbucks (SBUX), Chipotle Mexican Grill (CMG), Western Digital (WDC), Sandisk (SNDK) and ExxonMobil (XOM). Berkshire Hathaway's (BRK.B, BRK.A) first annual shareholder meeting since the retirement of Warren Buffett is scheduled for Saturday.

China Says Meta Must Undo $2B Manus Acquisition

One of Meta's recent deals, a $2 billion agreement to acquire AI start-up Manus, doesn't look like it will last. China's National Development and Reform Commission said in a statement early Monday that it has decided to block the deal and is requiring the companies to undo progress made on the transaction. Meta announced the deal in late December, and Chinese regulators said in January that they would evaluate the deal to make sure it followed China's export and foreign investment laws. Manus makes general purpose AI agents, models that are supposed to be capable of performing more complex, multi-step tasks on their own. Meta shares were little changed ahead of the opening bell.

Low-Cost Airlines Pitch Trump Administration on Assistance Package

Several discount airlines are looking to capitalize on the Trump administration's reported interest in supporting the low-cost flight industry. Multiple airlines including Frontier Group (ULCC) have estimated they will spend about $2.5 billion more than they had planned on fuel this year, and are seeking that amount of assistance from the federal government, The Wall Street Journal reported late Sunday. Talks between the airlines and government are expected to continue this week, according to the Journal. Separately, the White House has also reportedly been weighing the possibility of taking a stake in Spirit Airlines, amid reports that the discount carrier could be on the verge of liquidating. Frontier shares were holding steady ahead of the opening bell.

Alphabet shares have gained 12% since the start of the year.
Credit: Cheng Xin / Getty Images

Key Takeaways

• Alphabet's next earnings report is set to be released Wednesday afternoon, with shares seen potentially hitting fresh records following the results.
• Revenue is expected to have grown in the first quarter, with a small decline in profits as Alphabet and other tech giants continue their AI spending push.

Google parent Alphabet is due to report earnings Wednesday afternoon, with shares seen potentially hitting fresh records following the results.

Based on recent options pricing, traders expect Alphabet's (GOOGL) stock could swing up to 5% in either direction by the end of the week. From Monday's record close just above $350, a move of that size could lift shares to a new high of $368. The low end of that range could see shares slip below $333, giving up some of their recent gains amid a broader tech rally.

A string of recent high-profile deals, perceived wins for Google's Gemini, and some renewed optimism about AI demand have all helped boost enthusiasm for Alphabet's stock lately, with the shares up about 12% from where they started the year.

Why This Matters to Investors

A strong performance Wednesday could bolster confidence in Alphabet's stock, though the tech giant and many of its peers could also face pressure around their AI spending plans.

Citi analysts recently lifted their price target for the stock to $405 from $390, and said they will be looking for indications that engagement with Google's Gemini features is growing, along with updates on advertising revenue and Google Cloud demand.

Alphabet is expected to report first-quarter revenue of about $107.02 billion, up close to 19% year-over-year, according to estimates compiled by Visible Alpha, though earnings per share are seen dropping 3 cents to $2.73 as the company invests heavily in AI.

Wall Street analysts are largely bullish on the tech giant, with 12 of the 14 analysts with current ratings tracked by Visible Alpha calling Alphabet a "buy," along with two neutral ratings. Their average price target of $382 would suggested upside of about 9% from Monday's close.

This article has been updated since it was first published to reflect more recent prices and analyst estimates.

Fed Chair Jerome Powell and other Federal Open Market Committee members meet this week.
Credit: Samuel Corum / Bloomberg via Getty Images

There's a Fed meeting this week, and while they're always closely watched, this one is of particular interest to investors keen to see how the central bank says the economy is weathering the U.S.-Iran conflict. More clues, meanwhile, will come in the form of earnings reports, with Big Tech taking the spotlight.

The Federal Open Market Committee is slated to deliberate privately, then announce its interest-rate decision before a press conference on Wednesday. Most expect the committee to keep the federal funds rate between 3.5% and 3.75%, where it has sat since January. Still, some are hopeful that cuts may be coming later this year. 

The federal funds rate influences the interest rates charged on credit cards, car loans and mortgages. Lower rates bolster spending and encourage hiring, which has been sluggish enough to cause concern among some Fed officials, But lower rates can also exacerbate inflation, which the war hasn't helped.

Meanwhile, here come the “Magnificent Seven” tech giants. Alphabet, Amazon, Meta and Microsoft are slated to report results Wednesday, followed by Apple on Thursday. These are some of the largest companies in the world, and their results and forecasts can move markets. Some analysts are bullish about the industry's buildout of in AI infrastructure, but there are questions about when companies will see a return on those investments.

The tech industry has outperformed other sectors since the war began, and investors have embraced AI companies, looking past the threat of a protracted conflict. That has spread to the storage firms supporting the AI buildout, several which also report this week.

Market Recap

The Nasdaq and S&P 500 logged their fourth consecutive weekly gains, though the Dow lost some ground. The week was punctuated by a mostly upbeat Friday session that saw the S&P 500 rise 1.6%, tech shares climb, oil retreat and Intel soar to record highs for the first time since 2000. Read Friday’s markets recap here.

This Week's Top Events

Here's a look at major events in the week ahead. TradingView publishes a more detailed calendar, but clicking the link will take you off the Investopedia site.

• Tuesday: Data storage company Seagate Technology (STX) is slated to release results after the market closes, and discuss its numbers on a conference call at 5 p.m. ET.
• Tuesday: Starbucks (SBUX) is set to release its second-quarter results after the closing bell, followed by a conference call at 4:15 p.m. ET. Investors will be looking for signs that Starbucks' turnaround campaign is lifting sales. Another big company that serves a different style of food and drink, Chipotle Mexican Grill (CMG), reports Wednesday.
• Wednesday, April 29. The Federal Open Market Committee meeting, which begins Tuesday, is set to wrap up, with the committee announcing its interest rate decision at 2 p.m. ET and Fed Chair Jerome Powell holding a press conference 30 minutes later.  
• Wednesday: Alphabet (GOOG, GOOGL) is set to discuss its first-quarter results during a conference call at 4:30 p.m. ET. Alphabet shares fell in February when Alphabet said it would roughly double last year's capital spending, but investors cheered when the company said its new TurboQuant technology can reduce the memory load of AI models.
• Wednesday: Amazon (AMZN) is scheduled to host a conference call on its first-quarter results at 5:30 p.m. ET. Amazon's chip business is “on fire,” according to CEO Andy Jassy.
• Wednesday: Meta Platforms (META) is slated to release first-quarter numbers after the market closes, followed by a conference call at 5:30 p.m. ET.
• Wednesday: Microsoft (MSFT) is set to discuss its fiscal third-quarter results on a conference call at 5:30 p.m. ET. The tech giant reported greater revenue and profit than expected last quarter, but its shares plummeted as investors worried about its capital spending and reliance on a few key customers. 
• Thursday, April 30: Western Digital (WDC) is scheduled to release fiscal third-quarter numbers after the market closes, followed by a conference call at 4:30 p.m. ET. Sandisk (SNDK), another memory stock on the rise, is set to discuss its own results on a conference call at the same time.
• Thursday: Apple (AAPL) is slated to discuss its fiscal second-quarter results during a conference call at 5 p.m. ET. Investors will listen for signals about how incoming CEO John Ternus plans to move the company forward in the post-Tim Cook era.
• Friday, May 1: ExxonMobil (XOM) is set to discuss its first-quarter results on a conference call at 9:30 a.m. ET. Shares of Exxon and other oil companies have fluctuated in response to headlines about how much oil is moving through the Strait of Hormuz. Chevron (CVX) is also scheduled to release its first-quarter earnings, followed by a conference call at 11 a.m. ET.
• Saturday, May 2: Berkshire Hathaway (BRK.A, BRK.B) plans to webcast investor question-and-answer sessions held from 10:30 a.m. to 11:45 a.m. ET and 12:45 p.m. to 2 p.m. ET. The conglomerate—now led by Greg Abel, rather than legendary investor Warren Buffett—is slated to hold its annual shareholder meeting at 3 p.m.

More Investopedia Reads

Once the war ends, Americans may wait two to three years for inflation from oil supply shocks to ease, Diccon Hyatt reports. Investors are hopeful that Apple’s new CEO will help it create products for the AI era, writes Kara Greenberg. And Colin Laidley has insights into how chains are cashing in on Americans’ thirst for novel energy drinks and sodas.

Microsoft shares are down 12% since the start of the year.
Credit: Sean Gallup / Getty Images

Key Takeaways

• Microsoft's next earnings report is due Wednesday afternoon, with traders anticipating a big move from the tech giant's stock following the results.
• Revenue and profits are expected to grow year-over-year, with investors likely looking for updates on Microsoft's AI spending plans.

Microsoft is set to post its latest quarterly results after the closing bell on Wednesday, with the stock seen potentially hitting its highest point in months following the report.

Current options pricing indicates that traders expect Microsoft (MSFT) stock could move up to 6% in either direction by the end of that week. A move of that size from Friday's close could see the stock rise close to $450, which would be its highest point since Microsoft's last earnings report in late January, when worries about the company's AI spending and exposure to OpenAI sent shares tumbling. The low end of that range could drag the shares back to $391, giving up some of their gains in this month's tech rally.

Microsoft shares have recovered some of their losses in the past few weeks as big tech shares surged, but they remain about 12% lower for the year, and have lingered in negative territory for most of 2026 so far.

Why This Matters to Investors

Microsoft's latest report, along with other big tech earnings due this week, could give investors the latest look at AI spending plans in the industry.

Ahead of the results, Bank of America analysts said they will be watching for growth in Microsoft's Azure cloud sales as it brings more AI computing capacity online, improvements in Copilot subscriber growth, and stability in the company's non-AI efforts that drive Microsoft's free cash flow.

Microsoft is projected to report adjusted earnings per share of $4.07 on a 16% year-over-year jump in revenue to $81.42 billion for its fiscal third quarter, according to estimates compiled by Visible Alpha.

Analysts are overwhelmingly bullish on Microsoft. Fifteen of the 16 analysts with current ratings tracked by Visible Alpha have issued "buy" ratings for the stock, with one neutral rating. Their mean target around $583 would suggest close to 40% upside, implying a full recovery to new highs in the next 12 months.

The April meeting is likely to be Fed Chair Jerome Powell's last.
Credit: Anna Moneymaker / Getty Images

Key Takeaways

• The Federal Reserve is widely expected to keep its key interest rate steady at its meeting next week as it awaits the economic fallout from the Iran war.
• The meeting could be the last presided over by Fed Chair Jerome Powell, whose term ends in May.
• Powell could clarify whether he will remain on the Fed's board of governors—he had earlier said he would stay on the board until a Justice Department investigation of him ended, and it was dropped Friday morning.

The Federal Reserve is in for a regime change next month, but Chair Jerome Powell's probable final meeting is expected to be all about stability.

Financial markets are pricing in near certainty that the central bank's policy committee will keep its key interest rate flat in a range of 3.50% to 3.75% when its two-day meeting concludes Wednesday, according to the CME Group's Fed Watch tool, which forecasts rate movements based on fed funds futures trading data. Fed officials have taken a "wait-and-see" posture, watching how the Iran war is affecting the economy before moving the federal funds rate in either direction.

The war poses risks to both sides of the Fed's dual mandate to keep inflation low and employment high. The conflict has pushed up gasoline prices, stoking inflation. It has also created uncertainty among business leaders, which could lead to a hiring slowdown.

The threats are pulling the Fed's monetary policy in opposite directions. Keeping the fed funds rate higher for longer, or raising it, could counteract high inflation, while lower rates could encourage spending and fortify the job market if a downturn gathers momentum. Powell will likely address the Iran war and the dilemma it creates in his post-meeting press conference.

What This Means For The Economy

The departure of Powell would set the stage for incoming Fed Chair Kevin Warsh, who has promised a different approach to monetary policy. Warsh has criticized some of the Fed's practices, including holding trillions in treasuries and mortgage-backed securities to stabilize financial markets.

"We expect Powell’s overall tone will be consistent with a Fed that expects to be on hold for some time," economists at Deutsche Bank led by Chief Economist Matthew Luzzetti wrote in a commentary.

The meeting may also resolve the uncertainty surrounding the Fed's leadership.

Powell's term ends in May, before the Federal Open Market Committee's next scheduled meeting in June. However, his tenure on the Fed's board of governors lasts until 2028. Normally, Fed chairs in this position leave the board of governors when their leadership term ends. Following the traditional process, Powell would step aside for Kevin Warsh, the successor that Trump has nominated, who is currently in the midst of the Senate's confirmation process.

But the final few months of Powell's tenure have been anything but normal, largely due to a Justice Department criminal investigation of the current chair that was dropped on Friday morning.

The probe of cost overruns at the Fed's ongoing headquarters renovation had thrown the process into chaos. Powell had denounced the investigation as a pretense by the Trump administration designed to pressure the Fed into sharply lowering interest rates. Powell said he would not leave his seat on the board of governors until the investigation was "well and truly over, with transparency and finality." Not only that, but a key senator, Thom Tillis of North Carolina, said he would block Warsh's confirmation until the investigation was scrapped.

On Friday, U.S. Attorney for DC Jeanine Pirro said she was handing the investigation over to the Fed's internal watchdog, but warned she could reopen it if needed. Wednesday's press conference could be a forum for Powell to clarify whether he considers that "well and truly over."

If Pirro scrapping the investigation satisfies Tillis, the decks would be cleared for Warsh to take over by the next meeting in June. Warsh, a former Fed governor, promised "regime change" at the Fed in his confirmation hearing last week, saying he wanted to make sweeping changes to the way the central bank operates. Those include reducing the amount of financial securities the Fed owns, reducing the amount of "forward guidance" its leaders give about their interest rate plans, and changing its approach to inflation statistics.

Kevin Warsh, U.S. President Donald Trump's nominee for Chair of the Federal Reserve, has some thoughts about how inflation is measured.
Credit: Andrew Harnik / Getty Images

Key Takeaway

• Incoming Federal Reserve Chair Kevin Warsh supports using trimmed inflation measures to track price trends.
• Trimmed inflation measures exclude extreme price changes, offering a clearer view of underlying inflation, he argued.
• Lower inflation readings from trimmed measures could influence the Fed’s decisions on interest rate cuts.

No measure of inflation is perfect, which is why incoming Federal Reserve Chair Kevin Warsh wants to try out a different approach.

That includes a rather ambitious undertaking—working with government statisticians on a survey of a billion prices in the United States. But some changes are more straightforward, including one that would move an existing inflation measure further up in the Fed’s inflation dashboards.

Warsh, at his Senate confirmation hearing on Tuesday, said he preferred “trimmed” inflation mean measures because they give Fed officials a clearer reading of price trends.

The Fed’s goal is to keep inflation at an annual rate of 2%—a target it hasn’t met since the post-pandemic price spike. But that goal is only as good as the various inflation measures the Fed uses, which is why analysts are keeping an open mind on Warsh’s approach.

Why This Matters

How the Fed measures inflation can influence interest rate decisions and borrowing costs. A shift toward trimmed metrics could affect expectations for rate cuts and market stability.

“His overall point is well taken that there is always room for improvement,” wrote Douglas Porter, chief economist at BMO.

Trimmed inflation means are nothing new and have long been on Fed officials’ data dashboards, but Warsh’s preference could make them more important. Much like box and whisker plots in math class, they remove the outliers on the high and low end to come up with a “trimmed” mean. 

In one metric from the Dallas Fed, that meant trimming February’s 50.8% plunge in telephone equipment prices and the 37.5% drop in egg prices — along with the 124.5% jump in jewelry prices and the 384.6% spike in moving, storage and freight service prices.

Removing the outliers meant that yearly inflation rose by 2.3% in February, relatively close to the Fed’s 2% target. The Fed’s main inflation gauge, meanwhile, suggests inflation rose by 3% in February.

A Cooler Reading, For Now

Fed officials have been worried that their progress in returning to 2% inflation has stalled, just as the Iran war adds yet another shock to prices. But judging by trimmed mean measures, the inflation picture is less worrying, Warsh told senators on Tuesday.

“They're not where they should be, but I think that the trend is quite favorable,” Warsh said.

But trimmed means aren’t perfect, BMO’s Porter wrote. The Fed’s main gauge “flagged the very real inflation problem in 2021 much earlier than the trimmed mean did,” he wrote.

Lower inflation readings, in turn, could make the Fed more likely to cut interest rates if the Iran energy shock proves temporary. That would put the Warsh-led Fed in line with President Donald Trump’s stated view that the central bank should cut interest rates, even if the Fed opts for less aggressive cuts than Trump might want.

The flip side is that trimmed means may not always suggest a more dovish approach, Bank of America Economist Aditya Bhave wrote. That raises the “risks of cherry picking” if the data flips and trimmed means start to show a more alarming inflation outlook, he wrote. 

Even so, he said that looking at trimmed means is reasonable. 

After all, the Fed’s main inflation gauge also makes “an arbitrary choice” since it omits food and energy prices, he wrote.

Fed officials do take into account trends in food and energy prices, a key part of consumers’ spending, when deciding on monetary policy. But those costs are also volatile and can fall just as quickly as they rise—egg prices, for example, are back to more normal levels after a recent spike.

So Fed officials often look at “core” inflation indices, viewing the price of everything else as a gauge of underlying inflation trends.

Rather than stripping out food and energy, the trimmed means that Warsh prefers are “agnostic on what they exclude,” Bhave wrote. Beef prices can be part of a trimmed mean one month and be trimmed out the next.

The challenge for Warsh will be staying consistent once trimmed means show inflation is running hotter than the Fed’s current preferred measure suggests.

“To preserve Fed credibility and avoid optics of cherry picking, Warsh will need to stick with his preferred metrics even when they are outpacing the core,” Bhave wrote.