 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, Retail Sales, Housing, Earnings, Tech |
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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In spite of a rocky start, markets grew nicely this last week. Should we expect more growth to come?
Monday
Markets dove to open the week. The S&P 500 lost 1.6%. Fears over slower growth due to the Delta Variant and rising inflation gripped the markets. Earnings did not fail to impress for the day, which resulted in a few highlights. However, they did not burn bright enough to offset the negative sentiment.
Tuesday
Markets rebounded strongly as the Monday move turned into a ‘buy the dip’ mentality. The S&P 500 ended up gaining 1.5% on the day. Housing starts out-performed, coming in at a 6.3% increase versus 2.1% the prior month.
Wednesday
The move higher continued on Wednesday, as earnings were in focus. Earnings pushed the markets higher as Netflix was the only major company to miss earnings on the day. The economic data calendar was light with mortgage data being the highlight.
Thursday
The S&P 500 advanced .20% on Thursday. It was a day where it felt as though the markets were chasing their own tail. Markets actually opened in the green, despite initial jobless claims missing expectations. It then fluctuated into the red fulfilling the economic data that was released, but ended back in the green… Investor sentiment has been running strong ever since Monday’s sell off.
Friday
Markets rallied into the end of the week, with the S&P 500 climbing 1.01% on the day. Manufacturing data outperformed, coming in at 63.1, beating the 62.0 expectation. Services fell short, falling to 59.8. While strongly expansionary, it missed the intended mark of 64.8. This is an indicator that the re-opening is moving slower than expected. A slower re-opening could signal that inflation may not be as ramped as initially thought by many investors.
Conclusion
The strong Friday performance brought the week to a close up 1.95% on the S&P 500. This was an impressive week of gains when you consider that the S&P 500 lost 1.6% on Monday. The rebound and strong close on Friday are a testament to earnings. They are currently running at 86% of companies beating expectations. We are about a quarter of the way through earnings season, so there is still much to look forward to.
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Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
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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.