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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Jobs data missed expectations in April, but earnings did not disappoint! What drove markets last week?
Monday
Markets opened the week (and month) in the green. The S&P 500 led the way, up 0.25%, while the NASDAQ shed about 0.5%. This deviation is a continuation of the re-opening trade that has been playing out over the last 6 months.
Tuesday
There was a sharp reversal of fortunes on Tuesday as the markets dove in a way we had not seen since March. Former Federal Reserve Board (FRB) Chair, Janet Yellen indicated that monetary policy may tighten sooner than the FRB is saying. She later indicated (after market close) she in no way was trying to postulate on the direction of the FRB.
Wednesday
As a result of former FRB Chair Yellen’s retraction, markets surged at the open. This momentum faded as the day wore on. The S&P 500 ended up gaining 0.07%, while the NASDAQ fell 0.37%. The NASDAQ led the losses on Tuesday, so this further extends the re-opening trade at play.
Thursday
As a prelude to the jobs report, markets celebrated the lowest initial unemployment number since the start of the pandemic. The figure fell to 498K. For perspective, pre-pandemic, the figure was frequently around 200K. The S&P 500 gained 0.8% on the day, with the NASDAQ rising by 0.4%.
Friday
The monthly unemployment report was in focus on Friday. It was an abject disappointment. Unemployment rose to 6.1% from 6.0% and nonfarm payroll employment rose 266K. Expectations were for the unemployment rate to fall to 5.8% and payrolls to add 1M! While new hirers disappointed, the participation rate increased, which left more unemployed workers to be counted. By that measure the increase in the unemployment rate is not as disappointing. It just means that more people are feeling optimistic about job prospects. Even with the disappointment around jobs the S&P 500 managed to add 0.7% on the day.
Conclusion
If there is one thing the jobs report reminded us of this past Friday, it is that recoveries are uneven. The S&P 500 added 1.5% on the week. Earnings season has been robust with growth near 50% YoY and 86% of companies beating expectations. The miss on employment was actually viewed as a net positive. The FRB may not take the punch bowl away too soon as expected. Also, perhaps inflation concerns were overblown. More likely than not, it is an example of how non-linear life can be. We will likely see a lift in new hirers in coming months offsetting April’s ‘disappointment’.
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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.