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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Markets were slayed this last week. Everyone is feeling the pain, but why are we actually all alone?
Monday S&P 500 2.14% | NASDAQ 2.55%
As is often the case, markets opened the week as they had ended the prior week. Equities sold hard as the reality of a more aggressive Federal Reserve Bank (FRB) than recently expected becomes more obvious. The CBOE VIX (Measure of volatility) rose to 23.84, just above its long-term average.
Tuesday S&P 500 0.22% | NASDAQ 0.00%
Markets appeared flat on the day, however tech and consumer stocks performed well. Meanwhile, the rest of the market was soft.
Wednesday S&P 500 0.29% | NASDAQ 0.41%
Wednesday marked six months since Russia invaded Ukraine. Markets increased marginally on the day. Technology stocks led, which signals a more dovish expectation for the FRB. That will be made clearer after Friday’s Jackson Hole speech.
Thursday S&P 500 1.41% | NASDAQ 1.67%
Markets were in the green from go as GDP was revised up to -0.6%. Additionally, Core Personal Consumption Expenditures (PCE) are projected to fall to 4.4% from 4.8% tomorrow. PCE is the FRB’s preferred measure of inflation. The weaker inflation expectations with a better preforming economy provided a bump to equities on the day.
Friday S&P 500 3.37% | NASDAQ 3.94%
Core PCE fell to 4.6% and headline PCE fell to 6.3% (from 6.8%). Additionally, future inflation expectations have come down and consumer sentiment rose! However, markets did not rise. The FRB speech in Jackson Hole delivered a message that in fact rocked markets. They essentially said that rates will have to hold at a higher level for a longer period of time.
Conclusion S&P 500 4.04% | NASDAQ 4.44%
The FRB message indicates that a recession may not bring them to cut rates. Unemployment will have to rise meaningfully for them to feel that inflation will not resurge. A ‘meaningful’ rise in unemployment would likely be an amount that would occur well into a recession. At some point after that they will likely have to cut rates and restimulate the economy… Ultimately what this tells us is that we are on our own folks!
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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.