The end result of the week was green, but was there reason for it and does it tell us anything for this week?
Monday S&P 500 1.03% | NASDAQ 1.19%
Eleven major companies reported earnings, with one missing expectations. Much of the movement on Monday came as an extension of the Friday rally. A move based on the weaker than expected jobs report. Growth stocks outperformed as lower interest rates would carry a greater impact on their performance.
Tuesday S&P 500 0.13% | NASDAQ 0.10%
Twenty-three major companies reported earnings, with two missing expectations. Markets were little changed on the day. While stock stood steady, fixed income yields did slip on Tuesday. In general, this is a continuation of the last few days.
Wednesday S&P 500 0.00% | NASDAQ 0.18%
Fourteen major companies reported earnings, with three missing expectations. Mortgage rates slipped a little lower as rate hike expectations faded. The 10-year treasury rate, to the contrary, rose slightly on the day. This was a reversal of a recent trend. Not a notable enough increase to think that sentiment has changed.
Thursday S&P 500 0.51% | NASDAQ 0.27%
Eleven major companies reported earnings, with three missing expectations. Initial jobless claims came in higher than expected, but still at a muted level. The jobs data brought markets out of their two-day coma. Employment data is showing signs of softening. The hope is the Federal Reserve Board (FRB) will start getting the signals needed to start cutting rates.
Friday S&P 500 0.16% | NASDAQ 0.03%
Michigan Consumer Sentiment is projected to fall to 67.4 in May. If that holds true, it will be the lowest reading since August of 2023. This was a period where fears were high that a recession was on the horizon. The lack of earnings data and the weaker potential sentiment sent markets higher. Again, weakness is a signal of potential FRB moves.
Conclusion S&P 500 0.55% | NASDAQ 1.43%
Markets advanced for the week, albeit with little decisiveness. Market growth has all but stalled as more data is needed to entice investors. Last week’s message was clear from the FRB; they do not expect that their next move will be a hike. The focus is on the timing of a cut. Earnings data will slow down next week; however, inflation data will be in focus. It should give investors a better read on potential rate cuts later this year.
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It was a rough week for markets. Volatility is up, but will it be here to stay or are the clouds soon to part?
Monday
Markets dropped at the opening bell and gained briefly in mid-day trading; however, the S&P 500 never really gained momentum for the day. The index closed down .38% for the day. Importantly, the 10-year treasury closed above 2% for the second time in a week.
Tuesday
The S&P 500 opened in the positive at the news of easing tensions in Russia and Ukraine. PPI Figures came in slightly lower at 9.7% (Jan) compared to 9.8% (Dec) but are still high. As wholesale prices increase, the price to the consumer will also go up which is the concern with inflation. The market appeared undeterred following three day of negative trading. S&P closed up 1.58%.
Wednesday
The market looked like it was preparing for another down day in anticipation of FRB minutes from January. The S&P 500 was down 0.8% most of the day. In the end it climbed out, managing to rise 0.09%. At the same time the 10-year treasury slipped back below 2%. So, while the markets regained composure, safe haven assets were being purchased.
Thursday
The S&P 500 tumbled on Thursday, falling 1.70%. The NASDAQ led the way lower, falling 3%. Fears came from two fronts on Thursday. Markets were feeling tensions rise in the situation between Ukraine and Russia. Additionally, Federal Reserve Board (FRB) member, Bullard, spoke. He indicated the FRB would have to take more aggressive action than the markets were pricing in to fight inflation.
Friday
Markets continued the slide into Friday. The S&P 500 lost 0.72% on the day. It is not surprising to see markets sell into the long holiday weekend. It is an extended period of time for bad things to happen, given the geo-political risks at play.
Conclusion
The S&P 500 ended up losing ground by 1.57% last week. It is coming close to closing down 105, which marks a technical correction. Volatility is up and safe haven assets are catching a bid. This marks the first correction since September-October 2020. They are typically 2 to 3 months in duration. That means we still have time for some more volatility before the cloud’s part…
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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.