Lede

The Federal Reserve's concern over persistent inflation could lead to an interest rate increase in May, as inflation levels remain near historic highs at 6% -- well above the Federal Reserve's goal of 2%. This, coupled with the start of the first-quarter corporate earnings season, is causing heightened stock volatility and concern over advancing equity prices.

Summary

• The Federal Reserve's No. 1 concern is persistent inflation, which could lead to an interest rate increase in May.
• The Consumer Price Index, to be announced on Wednesday, could determine the central bank's next move.
• While inflation levels have eased for five months in a row, they remain near historic highs.
• To feel good about where inflation is headed, a moderation in price pressures across a wide range of categories is necessary.
• The banking sector remains on edge after two big bank failures last month.
• The first-quarter corporate earnings season begins this week, causing concern over the pace of earnings growth in 2023.
• TD Ameritrade's March Investor Movement Index shows that retail investors continue to be net buyers of equities, particularly in the Financial sector.
• The increasing power of retail investors, fueled by stimulus cash and easier access to trading platforms, has been an ongoing trend since the beginning of the pandemic.
• The five most popular stocks to purchase, according to TD Ameritrade, were Tesla, Rivian, Ford Motors, Amazon, and the embattled First Republic Bank.
• The Federal Reserve Bank of New York's March Survey of Consumer Expectations found that inflation expectations have increased at the short-term and medium-term horizons.
• Respondents were more pessimistic about the outlook for the US labor market than they were in previous months, and perceptions of credit access compared to a year ago deteriorated in March.