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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The S&P 500 and volatility were little changed week over week. The inside story, however, was far more interesting!
Monday
What. A. Monday… Markets ended the day higher. The reason for excitement is that at one point, the S&P 500 was down as much as 3%. It ended the day up 0.63%! The 3% fall moved the S&P 500 into correction territory and immediately caught a bid. Its ability to persist will remain to be seen as we get the Federal Reserve Bank (FRB) meeting results later this week.
Tuesday
It was almost déjà vu on Tuesday. Markets slumped early and attempted a comeback. That comeback stalled late in the afternoon with the S&P 500 losing more than 0.5% on the day. Much of the moves were continued speculation over the FRB meeting that will end on Wednesday.
Wednesday
The FRB did not disappoint. They have been very transparent about their intent to raise rates soon, soon is likely March. Additionally, they have stated that they will begin reducing their balance sheet via attrition after rate hikes. There are approximately $300B in under 90 maturities that could begin rolling off their balance sheet as early as this spring. It is still to be determined to what extent they will allow this to occur. Markets LOVED the news and showed the love by losing 0.15% on the S&P 500 for the day. This came after the index was up as much as 2% at times.
Thursday
The S&P 500 slipped 0.54% Thursday in a move that was contrary to data. GDP walloped expectations, growing by 6.9% when 5.5% was expected. Even 5.5% would have been lofty, however 6.9% was well above estimates. The concern is that the continued hot growth (consumption) will continue to lead to higher prices (inflation).
Friday
Markets bounced to end the week as the S&P 500 gained 2.45% on the day and 0.77% for the week. The sentiment from Friday was a clear indication from investors that many of the week’s concerns were likely overblown.
Conclusion
Volatility was way up at mid-week as markets were trying to decide how deep they wanted to take this correction. Late in the week, Bulls took over and buying ensued. Often there is a second wave of selling after the storm appears to have cleared. So, we may not be out of the woods just yet. Look for more clarity after the Friday jobs report this week.
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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.