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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Weakness persisted in the market across last week. Is this a trend that will likely continue or a soft patch in data?
Monday
Happy President’s Day!
Tuesday
Markets were flat to open the week. This was not the case for the energy sector, however, as energy added 2.51% on Monday. Much of the energy move came from the harsh winter storm and elevated energy usage information that should follow. Financials and communications were the only other sectors in the green for the day.
Wednesday
The day started lower and spent the trading day pulling out of the hole. It ended the day even. There was unexpected strength in producer prices (a leading indicator of inflation), retail sales, and capacity utilization (an indicator of corporate production).
Thursday
Much like Wednesday, Thursday opened in a hole and spent much of the day climbing out. Markets did not make it all the way out, however. Housing data and jobs data were both in focus. Building permits rose more than expected, however new starts decreased substantially. Jobless claims, a major focus right now rose more than expected. The weakness of data led to a softer market for the day. As of late this would have caused a market rise as it would have increased the likelihood of stimulus. Perhaps that is a foregone conclusion at this time.
Friday
Services data and existing home sales both impressed for Friday. Markets opened in the green but were unable to hold the momentum. They faded to breakeven and fell into the red to end the week. Signaling an indication of concern for the weekend news cycle.
Conclusion
Investor behavior throughout the week seemed to signal initial concerns, but with persistent buying. Across the week markets ended up shedding 0.72%. This was not much of a move. Buy sentiment persisted even in the face of weak economic data last week. Overall data has shown to be improving quicker than expected. This should lend itself to a continued rally.
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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.