Markets grew for the week for the first time in a month. Is it a reason to celebrate or a breather in the pullback?
Monday S&P 500 0.87% | NASDAQ 1.11%
Nine major companies reported earnings, with two missing expectations. Equities jumped to open the week. Outside of earnings data there was not much to support the rally. It was likely a jump on three consecutive weeks of down market, creating better by opportunities.
Tuesday S&P 500 1.20% | NASDAQ 1.59%
35 major companies reported earnings, with five missing expectations. Housing data came in better than expected. The heavy earnings data drove markets higher on Tuesday, pun intended. GM (GM) and Tesla (TSLA) were among reporters that helped propel markets.
Wednesday S&P 500 0.02% | NASDAQ 0.10%
40 major companies reported earnings, with six missing expectations. Core durable goods orders came in lighter than expected. Strong earnings data was counter-balanced by higher rate expectations. This left markets fairly unchanged.
Thursday S&P 500 0.46% | NASDAQ 0.64%
60 major companies reported earnings, with 13 missing expectations. GDP grew at a much slower pace than expected(1.6% vs 2.5%). Unemployment data continued to show strength. GDP and forward guidance from Meta (META) spooked markets early. They managed to climb halfway out of the hole that was dug as the earnings flowed in throughout the day.
Friday S&P 500 1.02% | NASDAQ 2.03%
13 major companies reported earnings, with five missing expectations. Consumer sentiment softened in April. Core Personal Consumption Expenditures (PCE) held steady at 2.8% in March. This is the Federal Reserve Board’s (FRB) preferred gauge of inflation. Between PCE data and earnings from Alphabet (GOOG) and Microsoft (MSFT) markets surged on the day.
Conclusion S&P 500 2.67% | NASDAQ 4.23%
The markets experienced a strong bounce back this last week in comparison to the last three weeks. Do not be fooled. Markets have a way to go to recapture highs as the growth did not even recover from the prior week. This indicates that there is room for markets to continue the run up as earnings season wears on. There are major hurdles this coming week with the FRB meeting, Jobs data, and Apple (AAPL) reports earnings.
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Stocks slid for another week. Was there anything we should learn from the moves this last week?
Monday S&P 500 1.03% | NASDAQ 0.60%
Markets opened the week as they left off the prior week. This has been a common trend as of late. The one difference being that markets closed below their June 16th low of 3,666.77, at 3,655.04. The S&P 500 is now down 23.80% YTD. The only meaningful economic news on the day was an under sold 2-year treasury auction. Being undersold provided heavy upward pressure on 2-year and 10-year rates.
Tuesday S&P 500 0.21% | NASDAQ 0.25%
The pressure was too much for markets on Tuesday. They opened in the green, with the S&P 500 up as much as 1.6%. All of that faded, though, as continued downward pressure on sterling caused upward pressure on the dollar. Sterling has been fading since the new government in the UK announced a tax cut package. This comes at a time when central banks around the world are tightening policy. It created a scenario where rates are expected to jump 1.25% and the currency is falling. These are typically highly correlated, which is in direct opposition to what is happening now. Tax cuts are viewed as inflationary and the wrong direction for a developed economy given the inflation issue at hand.
Wednesday S&P 500 1.97% | NASDAQ 2.05%
Rates swung violently to the south. When rates fall bond prices rise. Apparently, stocks rise as well as the easing rate environment created growth in equity markets. The Bank of England started a two-week bond buying program Wednesday. This was done in an effort to stem the bleeding as rates were running away to the north. Not much is expected to be different two weeks from now. This unexpected program sent rates lower drastically in the UK and also here in the US.
Thursday S&P 500 2.11% | NASDAQ 2.84%
The Thursday trade retraced all the gains made on Wednesday. GDP was re-affirmed for Q2 at -0.6%, providing two consecutive quarters of negative GDP. Classically a recession, but not this time. The logic is that consumer spending rose by .5% but that inventories dragged overall GDP into negative territory.
Friday S&P 500 1.51% | NASDAQ 1.51%
Quarter number three of 2022 is in the books, and it was not one to remember. The final reading of CORE PCE data (inflation reading) rose to 4.9% from 4.7%. This caused concern that we may be dealing with an aggressive FRB for some time. PCE is the FRB’s preferred measure of inflation.
Conclusion S&P 500 2.91% | NASDAQ 2.69%
Friday was a rough day to cap a rough week, month, quarter, and year. There are reasons for hope in the fourth quarter, but also reasons for doubt. Corporate earnings could buoy the markets in October/November; however, expectations have been diminished as an economic slowdown has been widely expected. The election could cause turbulence or be applauded for grid lock. And of course, the Santa Claus rally could brighten markets as consumer spending increases earnings, or it could drive market fears of more rate hikes from the FRB due to higher inflationary pressures.
One thing is for sure: large single day increases on the equity markets are not our friends. If markets jump up 2%, they can tumble just as fast (as was seen on Wednesday and Thursday).
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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.