US equity market posted meaningful gains at the outset of last week due in large part to the first round French election results and better than expected corporate results, particularly, from large cap tech and industrial names. The first round of the French election has delivered an outcome that investors appear comfortable with; it was a solid weekly performance despite the fact that the second half of the week saw prices largely flat-line.
Short term factors weighed on the markets:
Chief among those factors was Friday’s release of the initial Real GDP results for Q1. Consensus had been calling for a gain of 1.1%. The results were more sobering at 0.7% - below the lowest estimate in Bloomberg’s consensus. Q1 has historically been a weak period for the economy, this year even with a new administration, apparently is no exception. Given that Q4’s final GDP reading, released March 30th, was 2.1%, the Q1 results were a disappointment for investors. Durable goods data for March was also fractionally weaker than expected on a month-over-month basis at 0.7%. Consensus was calling for 1.1%. Though certainly less central in terms of measuring broad economic activity, last week’s Jobless Claims data also came in a bit higher than consensus expectations. The street was calling for 244k with a range of 240k-245k. It came in at 257k. Wage inflation, as measured by the Employment Cost Index for Q1 was a hotter than expected 0.8%. Consensus was calling for a rise of 0.6%.
Despite weaker than expected initial Q1 economic data, consumer confidence remains close to cycle highs. Consumer sentiment, as measure by the University of Michigan Consumer Survey Center, has remained solidly optimistic by nearly every measure in the reading.
Widely shared expectations are for seasonal strength to return to the economy this quarter as economic activity accelerates through the year. 
On Tuesday, the FOMC Meeting begins followed by the FOMC Announcement the following day (Wednesday at 2:00 PM EST). The expectations are for the announcement to outline gains in achieving inflation targets, an expected pick-up in economic activity as we move through Q2 and a constructive outlook that will not likely alter the timeline for further tightening over 2017. A great deal of attention will be paid to any mention of the Federal Reserve’s intentions and timing regarding winding down the balance sheet; a theme that is unequaled in importance for investors, away from current monetary policy. On the economic calendar you notice that there are six scheduled appearances by Fed officials on Friday alone. I suspect that the balance sheet is likely to be touched on.
If last week is any indication, we should see a solid week and a modest lift in pricing, in addition to some long sought after clarity from the Fed on what investors should expect in terms of shrinking the balance sheet in coming years.