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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A bad jobs report was delivered on Friday. Is it good news or bad news for the Market?
Monday
Markets opened the week on a strong note. The S&P 500 rose 0.5%. Rotation towards growth stocks continue. Optimism seemed to be brewing regarding the August jobs report due out at the end of the week.
Tuesday
Reversing trend from Monday, markets softened on Tuesday as the S&P 500 lost 0.1%. Home prices rose substantially year over year, however consumer confidence fell sharply last month. A weak consumer leads to weak earnings.
Wednesday
Markets were little changed on Wednesday as the focus continues to shift to jobs data due out on Friday. Investors are hoping that sustained growth in jobs could signal a strong 3rd quarter GDP reading.
Thursday
The S&P 500 gained 0.25% on Thursday. Factory orders rose 0.4% in July showing the economy is continuing to expand. Additionally, initial jobless claims fell to their lowest level since the start of the pandemic.
Friday
Markets were little changed on Friday as jobs data disappointed. The unemployment rate fell to 5.2% from 5.4%, however, non-farm payrolls missed the mark substantially.
Conclusion
Every month for one week the markets seem to focus on the Friday. The first Friday of every month is the all important jobs report. The health of the job market tells us about consumer spending in the future. It also informs us on how the Federal Reserve Board (FRB) may behave next. Full employment is 50% of the objective for the FRB. A strong jobs report means the FRB may tighten monetary policy. While a weak one actually signals that looser monetary policy may be around for a while. So, yes, the poor jobs report is not good for our economy. It was, however, a good indication that the FRB may continue bond purchases a little longer than originally thought.
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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.