Q1 earnings season preview, rate-cut bets rebuild

The final week of March 2026 extended the Q1 consolidation as markets positioned ahead of the April earnings season. Monday and Tuesday saw modest gains on continued AI-sector strength and dovish Fed rhetoric from vice chair interviews. Wednesday's ADP employment came in at 115k vs 140k expected, the weakest print since August 2024, triggering a dovish repositioning of rate expectations.

Thursday's ISM services PMI printed 50.3 (vs 52.1 expected), adding to the softening narrative. The S&P 500 still managed a 0.4% daily gain as rate-cut beneficiaries offset cyclical concerns. Friday's NFP for March printed +155k (vs +170k expected) with unemployment ticking up to 4.8%. The data cluster shifted June cut odds from 35% to 62%. The 10Y yield fell 12 bps to 4.10%. The dollar weakened 1.2%.

The week closed with the S&P 500 at 596, up 0.9%. The character of the week was rate-sensitive leadership reasserting: utilities (+2.3%), REITs (+2.8%), and small caps (+1.7%) outperformed, while defensives and financials lagged. Gold gained 1.5% to close near $3,300 on real-rate declines. The backdrop set up a dovish Q1 earnings season where companies guiding cautiously on volumes but resiliently on margins would be rewarded disproportionately.