The end result of the week was green, but was there reason for it and does it tell us anything for this week?
Monday S&P 500 1.03% | NASDAQ 1.19%
Eleven major companies reported earnings, with one missing expectations. Much of the movement on Monday came as an extension of the Friday rally. A move based on the weaker than expected jobs report. Growth stocks outperformed as lower interest rates would carry a greater impact on their performance.
Tuesday S&P 500 0.13% | NASDAQ 0.10%
Twenty-three major companies reported earnings, with two missing expectations. Markets were little changed on the day. While stock stood steady, fixed income yields did slip on Tuesday. In general, this is a continuation of the last few days.
Wednesday S&P 500 0.00% | NASDAQ 0.18%
Fourteen major companies reported earnings, with three missing expectations. Mortgage rates slipped a little lower as rate hike expectations faded. The 10-year treasury rate, to the contrary, rose slightly on the day. This was a reversal of a recent trend. Not a notable enough increase to think that sentiment has changed.
Thursday S&P 500 0.51% | NASDAQ 0.27%
Eleven major companies reported earnings, with three missing expectations. Initial jobless claims came in higher than expected, but still at a muted level. The jobs data brought markets out of their two-day coma. Employment data is showing signs of softening. The hope is the Federal Reserve Board (FRB) will start getting the signals needed to start cutting rates.
Friday S&P 500 0.16% | NASDAQ 0.03%
Michigan Consumer Sentiment is projected to fall to 67.4 in May. If that holds true, it will be the lowest reading since August of 2023. This was a period where fears were high that a recession was on the horizon. The lack of earnings data and the weaker potential sentiment sent markets higher. Again, weakness is a signal of potential FRB moves.
Conclusion S&P 500 0.55% | NASDAQ 1.43%
Markets advanced for the week, albeit with little decisiveness. Market growth has all but stalled as more data is needed to entice investors. Last week’s message was clear from the FRB; they do not expect that their next move will be a hike. The focus is on the timing of a cut. Earnings data will slow down next week; however, inflation data will be in focus. It should give investors a better read on potential rate cuts later this year.
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The bears are firmly in control right now. Should it last or is there hope on the horizon?
Monday S&P 500 0.69% | NASDAQ 0.76%
The start of the week was a trading day of uncertainty. Markets ebbed and flowed, finally finding a footing late in the day. Markets ended up rising but not in a convincing fashion given last week’s sell-off. Anticipation is building towards Wednesday’s Federal Reserve Board Press conference.
Tuesday S&P 500 1.13% | NASDAQ 0.95%
Markets opened in the red and stayed in the red all day. The economic data on the day was positive which of course led to a negative market. Housing starts rose by 12% in August. More robust new home data actually signals a stronger buyer than was expected. The concern reinforces the idea that the FRB has to go further than they already have to create demand destruction.
Wednesday S&P 500 1.71% | NASDAQ 1.79%
The FRB delivered a 0.75% rate increase. They have two meetings left for the year and they anticipate 0.75% in November and 0.50% in December. The unemployment and inflation data would have to soften substantially for a milder move.
Thursday S&P 500 0.84% | NASDAQ 1.37%
Markets continued their retreat post the FRB rate hike on Wednesday. Interest rates continued to climb in anticipation of 4.5% by year end. Interest rates and prices move in opposite directions.
Friday S&P 500 1.72% | NASDAQ 1.80%
The fall on Friday was worse than its headline number represents. The S&P closed at 3,693.23, however it reached a low of 3,649.16. This is a break of the support level of 3,666.77, which was the close on June 16th. The fact that markets did not stay below support into the close is not necessarily encouraging. It will likely be surpassed within the next few trading sessions.
Conclusion S&P 500 4.65% | NASDAQ 5.07%
We have been told that this is not a recession given the strength of the consumer. The FRB delivered another blow on Wednesday to the consumer by raising rates to 3.25%, moving into restrictive territory. The move should help to quell demand, but it is not the last. 1.25% is still expected before year end, bringing us to 4.5%. The market’s behavior is telling us that if we are not in a recession, that we will be soon. Our current recessionary behavior is specifically not the depth with which markets have fallen; rather, the bear market rally with a retest of prior lows following. This is a behavior that is typical of recessionary environments. This means that we should see several bear market rallies along the way. It could come from corporate earnings, political transitions in November, or even the vaunted Santa Claus rally. Look for growth, but with subsequent pull backs.
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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.