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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The Federal Reserve is trying to put the economy into ‘neutral’. What does it all mean for growth?
Monday S&P 500 0.81% | NASDAQ 1.90%
Ukraine regained territory in their war over the weekend. This improved sentiment early for markets. Elon Musk announced that he currently holds a 9% share of Twitter, which sent tech stocks higher.
Tuesday S&P 500 1.26% | NASDAQ 2.26%
ISM Services data came out strong at 58.3, but that did not deter a selloff in markets Tuesday. Federal Reserve Board (FRB) Governor Brainard made indication that ‘Quantitative Tightening’ could begin as early as May. This is earlier than markets are anticipating. This sent Bond and stock markets south. The ten-year treasury added .14% in yield on the day. If there was a silver lining, it would be that the 2/10 yield curve reverted back to a positive slope.
Wednesday S&P 500 0.97% | NASDAQ 2.22%
Markets opened lower and stayed there throughout the day. The anticipated FRB minutes from March were expected to show a hawkish FRB, sure enough they did. It is now expected that we will see a 0.50% hike in May. Additionally, FRB roll off of their balance sheet will likely begin.
Thursday S&P 500 0.43% | NASDAQ 0.06%
Market movements on Thursday were focused on a more aggressive FRB, given the minutes from Wednesday. Markets were up, but to be noted was that the leading stock sectors were defensive, i.e. staples and healthcare. Initial jobless claims fell to 166K for last week, which signals continued strength in the job market. This signal reinforces FRB action.
Friday S&P 500 0.27% | NASDAQ 1.34%
Growth stocks led lower on Friday as concerns swell regarding a potential recession as a result of an over-active FRB. We have time before a recession, but markets pricing growth stocks will not be fortunate in the run up.
Conclusion S&P 500 1.27% | NASDAQ 3.86%
Markets moved lower for the week as yield curve inversions and an aggressive FRB could bring us closer to recession. ‘Neutral’, where the FRB is neither tightening nor loosening monetary policy is perceived to be between 2% and 2.5%. We are currently sitting at 0.25%. If the FRB were to aggressively raise rates over the remainder of the year, then we could get to ‘neutral’. This means that we likely have 8 to 12 months before tighter monetary policy could lead to a recessionary environment.
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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.