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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We saw another route last week as economic data strengthened. What does it mean for the road ahead?
Monday S&P 500 1.06% | NASDAQ 1.27%
Markets opened the week on a positive tone. The gains were led by tech stocks, which were following the lead of Asian and European markets overnight. Much of the rally on the day was based on a falling dollar.
Tuesday S&P 500 4.32% | NASDAQ 5.16%
Consumer Price Index (CPI) Data was released Tuesday morning and the headline reading fell to 8.3% from 8.5%. The underlying core data strengthened to 6.3% from 5.9%. This was an unexpected move as housing costs (which represent 40% of core CPI) firmed, pushing the number up. The markets sold off dramatically in response to the news. Firming core data would give the Federal Reserve Board (FRB) more reason to be aggressive on rates. This solidified a move of 0.75% and perhaps even 1.0% on September 22nd…
Wednesday S&P 500 0.30% | NASDAQ 0.70%
Markets ebbed and flowed throughout the day, trying to find direction after Tuesday’s selloff. They ended up closing up with a last 10-minute run up from being 0.5% down.
Thursday S&P 500 1.13% | NASDAQ 1.43%
Initial jobless claims continued to improve and retail sales advanced more than anticipated. This did not move the markets higher. Stronger retail sales signal more work for the FRB to erode demand. Lower unemployment signals more dollars in consumers pockets to spend. The FRB needs to see higher unemployment in their efforts to contain inflation…
Friday S&P 500 0.72% | NASDAQ 0.90%
Consumer sentiment is projected to rise to 59.5 for the month of September. While this is good news, it signals the potential of stronger consumer spending which causes further inflation. This factor pushed stocks further into the red for the week.
Conclusion S&P 500 4.77% | NASDAQ 5.48%
It was a rough week for markets although economically the data was showing strength. We need economic figures to start reflecting rate hikes implemented in order to see a slowdown in the FRB’s path. Looking ahead, this past Friday was a major options expiration date. When options expire, usually gains are to be had the following week as long positions are taken. This may be a short-lived bump, however, given the strong economic data.
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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.