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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Markets rose on hopes of an infrastructure compromise. What does it mean for markets and inflation as we look ahead?
Monday
The new week brought optimism. So much so that the markets rebounded more than half the losses from the prior week in one day. All eyes are to Washington, however as Federal Reserve Board (FRB) Chair Powell is set to testify.
Tuesday
FRB Chair Powell’s testimony about inflation rising higher than expected did not sully the mood of markets. The S&P 500 still rose 0.51% on the day. While he acknowledged it rose more than they expected, they won’t be making any rash decisions about increasing rates early.
Wednesday
Markets were fairly unchanged for the day. The S&P 500 fell 7.44 points (0.18%). The new home market continued to cool as purchases fell by 5.9% (May). While construction costs have increased approximately 10% over the last year, new home prices have risen 17%.
Thursday
The market activity was bullish on Thursday with all major indices higher. This move was a forward-looking move as durable goods orders and new unemployment claims missed estimates. An infrastructure deal was agreed upon in principle which brought optimism on spending.
Friday
Consumer sentiment missed estimates. It was expected to rise to 86.4 and came in at 85.5 (June). The softer sentiment could lead to weaker than expected retail spending. It’s becoming more likely that second quarter GDP estimates will miss expectations.
Conclusion
Markets surged back this last week. Not on economic data, as that was weak, but rather the hope brought about from an infrastructure package. If delivered, it should alleviate some of the jobless rate issues plaguing the new expansion. However, it will likely exacerbate some supply line constraints. This will calm some overall inflation concerns while leaving material prices elevated for some time.
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