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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Markets moved lower last week, again. Is volatility telling us anything about what to expect for the next month?
Monday
We experienced a very modest day of movement on Monday. A welcomed change from the headline risk that has been accompanied with every weekend as of late. The S&P 500 lost 10 points or 0.24%.
Tuesday
Volatility picked back up on Tuesday. The implications from sanctions on Russia posed a difficult pill for markets to swallow. Early, the S&P 500 fell more than the NASDAQ as markets were pricing in a less hawkish Federal Reserve Board (FRB). The S&P 500 ended up falling 1.63%, while the NASDAQ lost 1.69%.
Wednesday
A full reversal was in order Wednesday. The S&P 500 recovered all the losses from Tuesday as it rose 1.80%. NASDAQ lagged, as has been the standard as of late, rising 1.62%. The FRB chair, Jerome Powell, testified before congress on Wednesday. During which he made it clear that a 0.25% rate hike is more likely for an opening move, not 0.50%. This was cheered by markets as a less hawkish stance than expected in recent weeks. At the same time, he also stated that consecutive hikes should be seen as normal. It felt as though the FRB chair was trying to send a message to expect that later this year.
Thursday
Markets rose on Thursday. The S&P 500 rose 1.33% on the day while the NASDAQ lagged, rising 0.04%. This is a signal that strong jobs data is expected for tomorrow. Strong data would increase the hawkishness of the FRB. This is because it would make it easier for the FRB to hike interest rates.
Friday
Happy Jobs Friday! Jobs data did not disappoint as the unemployment rate fell to 3.8% and 678K nonfarm jobs were added. The participation rate reached a pandemic high of 62.3. This is a signal that more workers are optimistic about their job prospects. The strong jobs showing is a signal that the FRB will be more concerned with inflation in their coming meeting. This makes a rate hike all but a certainty for March. With all that good news, we were rewarded with a down market. The tension in Ukraine after a standoff at a nuclear power plant was a bit much for markets to handle. Additionally, the fears of a rate hike’s impact on earnings took a toll on stock prices. The S&P 500 ended up falling 0.79% on the day. The NASDAQ sold off 1.66%.
Conclusion
The week was not great for markets as the S&P 500 lost 1.27% and the NASDAQ lost 2.78%. VIX started the year at 16.60 and has climbed as high as 33.32, which was this past Tuesday. Market volatility over the next month is now expected to be around 1.6% daily. That volatility could be reflected in gains or losses but given geo-political risks at play the latter is likely.
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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.