Markets sold consistently across the week. Is there more red to expect in coming weeks?
Monday S&P 500 1.20% | NASDAQ 1.79%
Happy Tax Day! Retail sales expanded more than expected in March. Three major companies reported earnings, all three met expectations, all of which were financials. This was not surprising as financials usually head up earnings season. They also give us a good indication of how earnings season should go. Retail sales, however, took center stage as a strong consumer reduces the need for Federal Reserve Board (FRB) rate cuts. This caused an outsized move downward as investors anticipate less stimulus for 2024.
Tuesday S&P 500 0.21% | NASDAQ 0.12%
Housing data for March came in weaker than market expectation. Ten major companies reported earnings, with two missing expectations. Although mild, the losses continued. FRB Chair Powell indicated that inflation’s recent strength does not give the board confidence to start easing policy.
Wednesday S&P 500 0.58% | NASDAQ 1.15%
11 major companies reported earnings on the day, with three missing expectations. Focus was squarely on earnings as there was little economic data on the day. Tech stocks took a hit as AI chip orders for a specific company did not meet expectations. As would be expected this hit the tech heavy NASDAQ harder than the S&P 500.
Thursday S&P 500 0.22% | NASDAQ 0.52%
Initial unemployment claims remain benign. Existing home sales also slowed in March. 11 major companies reported earnings on the day, with one missing expectations. Markets were down for the day, but in a less dramatic fashion. Robust employment data typically is not favorable information when hoping for an FRB rate cut (as investors are).
Friday S&P 500 0.88% | NASDAQ 2.05%
Six major companies reported earnings on the day, with one missing expectations. NASDAQ led the way lower as Tech and communications got hit hardest. The best performers on the day were defensives, like utilities, healthcare, staples, and also financials.
Conclusion S&P 500 3.05% | NASDAQ 5.52%
The week was bloody. There was not a single up day for the S&P 500 or the NASDAQ Composite. The moves were not founded in fundamental data, as earnings did well. Some forward guidance shows warning of slowing revenues throughout the year, but that is normal for the last two years. Economic data, which signals the economy is doing well, has actually pushed stocks lower. The stronger the economy, the less likely the FRB is to act in reducing rates. The sell-off has extended to approximately 6%. It may take a breather in the coming days but expect that we are not done.
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September turned out to be a volatile month after all. Should we expect a scare from October as well?
Monday
The S&P 500 started the week mildly lower, 0.27%. Core durable goods orders delivered less return than expected. It rose 0.2% in August where 0.8% was expected. The focus was more on the debate in Washington over the debt ceiling and the potential of a government shutdown.
Tuesday
Selling accelerated on Tuesday as the S&P 500 lost 2.04%. Long term interest rates climbed dramatically on the day as tighter monetary policy is expected in the future. The Federal Reserve Board (FRB) Chair, Powell, was testifying in Washington. Concerns that ’Transitory’ inflation, will not be so transitory, dominated rate activity.
Wednesday
Markets stabilized on Wednesday, but that is not necessarily good news. The S&P 500 rose 0.1%. It is important to observe investor activity the day following a large sell off. The lack of a bounce signals an acceptance of fair value for the losses of the previous day.
Thursday
Selling pressure persisted on the last day of the month as the markets sold off an additional 1%. This gave us a negative month on the S&P 500 for the first time since January. In case you forgot, we had Game Stop to thank for January… You take that out of the equation, and this is the first down month since October of last year.
Friday
New month, new you??? Markets welcomed the 4th quarter, as the S&P 500 rose 1.15% to end the week and say goodbye to September. The Government averted a shutdown on Thursday night lending to the upbeat tone of investors. To be clear, the debt ceiling still needs attention over the next few weeks.
Conclusion
What a September it was, as the S&P 500 lost 4.75%! A market correction is marked by a fall of 10% or greater. Look for volatility to continue in October as the debt ceiling situation remains unresolved. Also, we are building to what should be an FRB tapering program in November. That will be just in time for the consumer to save the economy with holiday shopping…
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
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.