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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Rates were more subdued last week. Has inflation been overblown or will rates continue to climb in response?
Monday
Investors attempted to move higher at the open of the week, but they failed… The S&P 500 ended up losing 0.8%. A 3% rise in oil prices stoked concerns that inflation was going to persist.
Tuesday
Markets slipped as the S&P 500 lost 0.4% on the day. Earnings season starts in earnest this week with most major banks reporting. Concerns lie not with current performance but rather the forwarding guidance. The expectation is that companies will begin to reference the impact inflation will have on future performance.
Wednesday
The S&P 500 rose 0.3% on earnings data. Economic data was not aiding markets as headline inflation rose to 5.4% YoY in September. Softer core inflation caused interest rates to slip though. This could cause the Federal Reserve Bank (FRB) to delay the start of tapering. An overall dovish policy move that favors growth stocks.
Thursday
Investors drove the market higher at the open as employment data improved. For the first time since the start of the pandemic initial jobless claims fell below 300K. Markets were able to hang on to the gains as the S&P 500 rose 1.7% on the day!
Friday
Markets moved up to close the week. The S&P 500 rose 0.75% on the day. Markets jumped at the open on unexpectedly strong retail data for September, closing out the 3rd quarter. After the jump at open, investors coasted into the close.
Conclusion
The S&P rose nearly 2% on the week, while yields started to shrug back from their highs a few weeks ago. Interest rates are still expected to be on the rise from a cyclical standpoint. The tactical move lower is not surprising considering the shock to the upside over the last month.
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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.