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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Markets kind of heated up last week but in the wrong way. Should more of the same be expected?
Monday S&P 500 0.40% | NASDAQ 0.48%
Manufacturing data out Monday morning signaled a weaker than expected economy. It is still growing but at a slower pace than expected. This caused markets to come out of the gates hot. That momentum cooled as the day wore on. The major catalyst to this was the 10-year treasury rate climbing above 3%. This benchmark is symbolic of future rate hikes by the Federal Reserve Board (FRB).
Tuesday S&P 500 0.95% | NASDAQ 0.94%
Markets opened in the red but bounced as the 10-year treasury fell below a 3% interest rate. Energy shares benefited from a Goldman Sachs forecast that projected $140 oil this summer (currently appx. $121). Additionally, World bank projections for global growth were revised lower, which implies there will be pressure on FRB hike decisions.
Wednesday S&P 500 1.08% | NASDAQ 0.73%
Equities fell on the day. This came as oil inventories were lower than expect. Lower inventories mean higher prices, in turn, means more inflation–which ultimately, means more rate hikes…NYMEX crude oil was up over 2% on the day.
Thursday S&P 500 2.38% | NASDAQ 2.75%
Markets tumbled on Thursday on news that the ECB would begin rate hikes in the coming month. Oil markets faired better with NYMEX crude only falling 0.57%. Friday brings Consumer Price Index (CPI) data that investors may very well be priming for.
Friday S&P 500 2.91% | NASDAQ 3.52%
CPI data out Friday morning showed inflation had unexpectedly climbed to the highest level in recent history. This led to renewed selling pressure on the markets as it could create a more aggressive FRB. Interestingly, Core CPI which strips out food and fuel, actually went down. Weaker prices in those key areas would be key to renewed consumer confidence.
Conclusion S&P 500 5.66% | NASDAQ 7.05%
The prior two weeks resembled a calming in markets for the first time since March. This last week made sure no one was lulled into a false sense of stability. Volatility rose sharply on Friday, but still remains below long-term peaks. Also, the S&P 500 has fallen within striking distance of closing in a technical bear market. It should be expected that the markets will retest those lows in the near future.
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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.