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 continued to see turbulence last week. Is there something to it, or a blip on the radar?
Monday
The week opened on a positive note as the S&P 500 shrugged off the prior week’s losses and gained 0.25% on the day. The advance was spear headed by an advance in commodity prices. This follows recent hurricane activity in the southeast.
Tuesday
Markets resumed the recent trend of falling. The S&P 500 shed 0.6% on the day, while bonds saw a safe haven bid. Core Consumer Price Index (CPI) rose by 4.0% YoY (Aug), slower than the 4.2% expected. Slowing inflationary pressure could be attributed to failing consumer sentiment but could also be easing supply side constraints.
Wednesday
The seesaw continued as markets rose sharply on Wednesday. Sharpley is relative, as the rise was 0.9%; as of late changes in value of more than 0.5% have become sharp moves. VIX is supposed to be forward looking volatility for the next month. When VIX is at 20 (currently) that would imply an expectation that moves will be less than 1%/day.
Thursday
Retail sales unexpectedly jumped, which caused a down day for equities. This is a continuation of the good news is bad news that has been occurring as of late. Unemployment data was also released on Thursday showing that initial jobless claims increased from 312K to 332K. This was largely expected with regional hurricane activity tamping down job activity. So, it carried little impact on market activity.
Friday
The week ended with a stumble as all, but one major index (including bond indices) fell on the day. Consumer sentiment remained a tepid 71.0 in September. For frame of reference the lowest level during 2020 was 71.8 in April. The concern is that a weak consumer will lead to a weak economy as consumption makes up approximately 70% of economic activity.
Conclusion
It was a week to forget for markets as the S&P 500 fell for the second week. While the weekly loss was only a little more than a half percent, the fall from the peak is now about 2.5%. A true correction would be a 10% fall, which is still a long way off. Looming ahead, however, is a debt ceiling fight, variant news (always), the rest of hurricane season, consumption concerns, and a Federal Reserve Board (FRB) meeting this week. Nothing to see here…
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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.