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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Oil fell and markets fell with them. Why did the inflation maker not have a positive impact on equities?
Monday S&P 500 0.02% | NASDAQ 0.14%
Market movement was choppy all day. They ended up roughly unchanged. Investors were digesting elevated Russian activity in Ukraine and mixed earnings data. An outperformer was Bank of America as they capitalized on consumer lending, which will likely slow in the second quarter.
Tuesday S&P 500 1.61% | NASDAQ 2.15%
Stocks came out of the gates smoking hot on Tuesday. Yields were rising, which would typically signal a stronger S&P 500, but it was NASDAQ that led the way. This came as a result of weaker energy prices. That would signal weaker inflation and less impetus for rate hikes.
Wednesday S&P 500 0.06% | NASDAQ 1.22%
Markets ebbed and flowed between gains and losses throughout the day. Crude inventories fell more than expected, causing oil prices to be more volatile on the day. Earnings data performed well with the exception of United Airlines.
Thursday S&P 500 1.50% | NASDAQ 2.06%
The trading day started red hot with the S&P 500 up over 1%; however, that faded immediately. The fade came as yields pressed higher. Equities sold off as inflationary pressures lead us to persistent rate hikes likely throughout next year.
Friday S&P 500 2.77% | NASDAQ 2.55%
The selling continued into Friday. The pressure on yields continued and oil prices continued to ease. Those easing prices did nothing to buoy stocks. Oil prices struggled as a result of continued lockdowns in Shanghai. The lack of demand from that region has dampened prices.
Conclusion S&P 500 2.60% | NASDAQ 3.60%
Oil Prices have softened over the last week. On the surface, this can be seen as a positive as it would signal weaker inflationary pressures over the next several weeks (and if it persists, months). “If it persists” is the key, however. The current move in oil prices has to do with slowing demand as Shanghai remains under a COVID related lockdown. If they were to reopen soon, that demand comes back online. More concerning is the impact their closure will have on supply lines a few months from now. Our demand will deplete inventories and shelves likely will not be restocked in time for that depletion. This will further delay the softening of inflationary factor.
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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.