Back Slide | February 16, 2024

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS: S&P 500, NASDAQ, CPI, Earnings, Oil, Retail Sales, Housing, PPI

Markets gave back much of the previous week’s profits. Will the slide continue or was the move temporary?

Monday                      S&P 500 0.09% | NASDAQ 0.30%

Six major companies reported earnings, with all meeting expectations. Markets opened in the green, but that rally tumbled to even on the day. The inflation reports due out Tuesday likely kept any major moves at bay.

Tuesday                       S&P 500 1.37% | NASDAQ 1.80%

21 major companies reported earnings, with seven companies missing expectations. That, however, did not drive markets on Tuesday. Consumer Price Index (CPI) data showed inflation staying firmer than was expected (3.1% on a 2.9% expectation). The bad news meant markets will likely not see a rate cut in the first half of 2024.

Wednesday                 S&P 500 0.96% | NASDAQ 1.30%

Happy Valentine’s Day! Markets bounced after the slide seen on Tuesday. 19 Major companies reported earnings, with four companies missing expectations. Crude inventories mounted more than expected, 12M barrels vs 3.3M expectation. The bounce recaptured more than half of the losses from Tuesday.

Thursday                     S&P 500 0.58% | NASDAQ 0.30%

18 major companies reported earnings, with four companies missing expectations. Initial jobless claims remained subdued. Retail sales slumped in January; not surprising in the first quarter. GDP expectations ticked down to 2.9% from 3.4%. The negative economic news seemed to alleviate some investor concerns that an FRB rate cut may be heavily delayed.

Friday                          S&P 500 0.48% | NASDAQ 0.82%

Housing data showed weakness with both housing starts and building permits pulling back. That economic weakness was unable to help stocks, however. Wholesale inflation came in firmer than expected, following CPI data out earlier in the week. The data just confirms the concerns from the CPI report. This continues the pressure on interest rate cuts to be deferred to the back half of 2024.

Conclusion                  S&P 500 0.42% | NASDAQ 1.34%

Approximately 80% of S&P 500 companies have reported earnings. Earnings grew year over year by approximately 3%. That is great news, but the bad news is that earnings season is coming to a close soon. Everyone is looking at this year with expectations of rate cuts and that will come back into focus now. At the start of the year, many believed that the FRB was likely to start cutting rates in March. That expectation has now been pushed back to either June or July. Stronger economic or inflation data will continue to hold rate cuts at bay. The FRB has indicated they expect to cut rates as many as three times this year. That is still likely in the back half of 2024 and likely fully priced in at this point. Markets will likely be overly sensitive to new data that supports this view for the next few weeks.

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