Markets grew for the week for the first time in a month. Is it a reason to celebrate or a breather in the pullback?
Monday S&P 500 0.87% | NASDAQ 1.11%
Nine major companies reported earnings, with two missing expectations. Equities jumped to open the week. Outside of earnings data there was not much to support the rally. It was likely a jump on three consecutive weeks of down market, creating better by opportunities.
Tuesday S&P 500 1.20% | NASDAQ 1.59%
35 major companies reported earnings, with five missing expectations. Housing data came in better than expected. The heavy earnings data drove markets higher on Tuesday, pun intended. GM (GM) and Tesla (TSLA) were among reporters that helped propel markets.
Wednesday S&P 500 0.02% | NASDAQ 0.10%
40 major companies reported earnings, with six missing expectations. Core durable goods orders came in lighter than expected. Strong earnings data was counter-balanced by higher rate expectations. This left markets fairly unchanged.
Thursday S&P 500 0.46% | NASDAQ 0.64%
60 major companies reported earnings, with 13 missing expectations. GDP grew at a much slower pace than expected(1.6% vs 2.5%). Unemployment data continued to show strength. GDP and forward guidance from Meta (META) spooked markets early. They managed to climb halfway out of the hole that was dug as the earnings flowed in throughout the day.
Friday S&P 500 1.02% | NASDAQ 2.03%
13 major companies reported earnings, with five missing expectations. Consumer sentiment softened in April. Core Personal Consumption Expenditures (PCE) held steady at 2.8% in March. This is the Federal Reserve Board’s (FRB) preferred gauge of inflation. Between PCE data and earnings from Alphabet (GOOG) and Microsoft (MSFT) markets surged on the day.
Conclusion S&P 500 2.67% | NASDAQ 4.23%
The markets experienced a strong bounce back this last week in comparison to the last three weeks. Do not be fooled. Markets have a way to go to recapture highs as the growth did not even recover from the prior week. This indicates that there is room for markets to continue the run up as earnings season wears on. There are major hurdles this coming week with the FRB meeting, Jobs data, and Apple (AAPL) reports earnings.
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The route of the NASDAQ picked up steam last week. What does this mean for broad markets?
Monday
Markets rebounded strongly on Monday, led by the Nasdaq that was so sorely bruised last week. The Nasdaq rose 3.01% while the S&P 500 added 2.38% on the decidedly bullish day. Leading the way were financials, technology, and industrials.
Tuesday
The day started in the red. The sell trend continued to pick up steam additional losses persisted. This happened as interest rates continued their march higher.
Wednesday
The reflation/inflation trade gathered steam on Wednesday as markets sold off strong. The S&P 500 lost 1.32% and the NASDAQ fell 2.7%. The tech sell-off strengthens as yields rise. The rise could also pose a concern for the feverish housing market as mortgage rates rise.
Thursday
The day started very mundane and in the green. That faded quickly after Federal Reserve Board (FRB) Chair Powell spoke. He said they will not raise rates any time soon, however, no potential solutions for current rate issues were given. Markets dove and interest rates rose on the lack of guidance from the FRB. Investors at this time seem to be betting against the FRB’s statements which is a dangerous stance to take. The assumption is that inflation will be meaningful enough that the FRB will react sooner than they want.
Friday
Markets started the day in the green only to fade quickly to be down as much as 1.2% for the S&P 500. Mid-morning however everything (and I mean everything) came surging back. The mid-morning low put the NASDAQ squarely in correction territory (a pull back of 10% or more). It had fallen nearly 12% from its high in February. The NASDAQ ended up more that 1.5% while the S&P 500 led the way, up almost 2%.
Conclusion
The S&P 500 rose 0.81% on the week. This was its first positive week in the last three. Recent market weakness should be indicative of a correction rather than a prolonged downturn for several reasons. Manufacturing and services are both in expansionary territory. Jobs are growing at a pace quicker than expected. Vaccinations are moving ahead of schedule. The FRB is remaining very accommodative. Additional stimulus is coming sooner than later. All the turmoil has been in fear that growth is going to be TOO strong, TOO fast, causing inflation. The fear being that it will cause corporations to miss elevated growth expectations on a higher debt burden. That said, the route of the NASDAQ is occurring on positive economic expectations, which should help lead the markets higher.
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Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.