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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Welcome, 2022! There was a quick shift in market behavior as the calendar rolled over. What does it mean for the year?
Monday
The week began much as it ended. The low volume trade continued, resulting in an S&P 500 that rose 0.6%. Interest rates rose as expectations increased, speculating that Federal Reserve Board (FRB) minutes would reflect a more hawkish central bank.
Tuesday
The mild market activity continued on Tuesday. The S&P 500 ended the day down 0.1%. In sharp contrast, the Nasdaq slid 1.3% as we see leadership focused on Value stocks over Growth stocks.
Wednesday
Markets dove on Wednesday on FRB minutes that showed a more hawkish FRB. Taper, hike, and reduction of the balance sheet all to be on the table for March. Value outperformed Growth again, but everything fell. Hikes being on the table for March means that 3 to 4 hikes are possible for 2022.
Thursday
There was no dead cat bounce on Thursday in response to the fall on Wednesday. A dead cat bounce is when markets surge in response to a fall the prior day but fall short of recapturing the previous high. Interest rates remained elevated on the week in response to a hawkish FRB. ISM serviced data underwhelmed, falling 4 points short of the expectation. Omicron infection rates likely played into the slowdown.
Friday
Happy Jobs Friday! Jobs added missed expectations as the impact of Omicron began to make itself known. This generated lower rates and a sideways market at the open. The impression being that the FRB will have reason for a pause in March should jobs continue to show slow gains.
Conclusion
The volatility of the markets rose 2 points across the week. Additionally, 10-year treasury rates climbed 14 basis points. Both were most notably impacted by an aggressive FRB report. Volatility is really an indication of the next month or so. In contrast, the interest rate move is more likely an indication of 2022. The FRB is now expected to be more aggressive on the interest rate front. Tighter rates do mean less consumer spending, which lead to less corporate earnings. If done right, a balance can be reached, allowing for a good year for equities.
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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.