The S&P 500, Dow Jones Industrial Average, and Nasdaq all closed the last week of April with gains while the Russell 2000 logged a sizable decline. Investors received a huge slate of earnings news and economic data this week, which all reflected mixed activity. Those mixed results fueled a midweek sell-off before a strong rally effort during the last two sessions saw the market pick itself back up.
Earnings results from many mega cap stocks pulled a lot of focus this week. Namely, Alphabet (GOOG), Microsoft (MSFT), Meta Platforms (META), and Amazon.com (AMZN) all reported quarterly results. Unsurprisingly, their reports received mixed reactions from investors.
GOOG and AMZN declined on their earnings reports, with the latter warning about slowing cloud services growth, while MSFT and META rose sharply. Nonetheless, mega cap stocks a class made an outsized contribution to index level gains. The Vanguard Mega Cap Growth ETF (MGK) rose 1.9% on the week.
The continued outperformance of the mega caps helped foster a sense of relief that those names are still performing relatively well from an operational standpoint and maintaining their position as market leaders.
On the flip side, some earnings reports piled onto investors’ lingering growth concerns. Most notably, UPS (UPS), Dow component Dow Inc. (DOW), Texas Instruments (TXN), and Norfolk Southern (NSC) all disappointed with their earnings and/or guidance.
Ongoing fallout at First Republic Bank (FRC) following its disappointing earnings report, which featured a 40% decline in deposits, renewed lingering worries about banks facing higher deposit costs and tighter lending standards, potentially impeding on economic growth prospects. Notably, the market bounced back quickly from a sharp decline after CNBC reported that FRC is likely headed to receivership, indicating that issues at FRC are not viewed as systemic.
Economic data this week showed signs of weakness, yet there was no clear signal that the economy is deteriorating rapidly. The advance Q1 GDP report didn’t look great on the surface with real GDP increasing at an annualized rate of 1.1% after increasing 2.6% in the fourth quarter. However, personal consumption expenditure growth accelerated in the first quarter to 3.7% from 1.0% in the fourth quarter.
The March Durable Orders report contributed to slowdown concerns due to a 0.4% decline in nondefense capital goods orders in March — a proxy for business spending. Separately, the labor market remains strong as evidenced by the initial jobless claims remaining a long way from the levels that have been seen in past recessions since 1980.
The S&P 500 communication services sector (+3.8%) was the top gainer this week by a big margin, followed by information technology (+2.4%) and real estate (+1.5%). The utilities (-1.0%) and industrials (-0.6%) sectors logged the biggest declines.
Treasuries logged gains across the curve this week. The 2-yr note yield fell 10 basis points to 4.06% and the 10-yr note yield fell 12 basis points to 3.45%. The U.S. Dollar Index closed the week flattish at 101.68.
Below are truncated summaries of daily action:
Monday:
The stock market had another lackluster showing on Monday. Investors remained in wait-and-see mode ahead of some market-moving earnings news and economic data later this week. The main indices logged only modest gains or losses, ultimately settling the session in mixed fashion.
The hesitancy on Monday came ahead of a slate of important economic data this week, including the Fed’s preferred inflation gauge on Friday (the March core-PCE Price Index), along with earnings results from Alphabet (GOOG) and Microsoft (MSFT) on Tuesday, Meta Platforms (META) on Wednesday, and Amazon.com (AMZN) on Thursday.
Without a lot of market-moving catalysts, mega cap stocks drove a lot of the index level price action. The Vanguard Mega Cap Growth ETF (MGK) was down 0.2% while the Invesco S&P 500 Equal Weight ETF (RSP) rose 0.2% and the market-cap weighted S&P 500 was up 0.1%.
Dow component Coca-Cola (KO) initially moved higher as investors digested a better-than-expected Q1 earnings report, but KO gave back those early gains to close with a slim loss.
There was no U.S. economic data of note on Monday.
Tuesday:
Stocks had been languishing in tight trading ranges for several sessions before finally making an outsized move on Tuesday. The major indices all registered decent losses despite roughly 75% of companies reporting quarterly results since Monday’s close topping earnings expectations.
Growth concerns drove Tuesday’s price action following First Republic Bank’s (FRC) disappointing earnings results that included a 40% decline in deposits and downbeat guidance from UPS (UPS).
FRC’s earnings report renewed lingering worries about banks facing higher deposit costs and tighter lending standards, which would impede economic growth prospects. Sentiment around FRC deteriorated further following a Barron’s report that a team of wealth advisors managing $13 billion in assets is said to be leaving the bank, and a Bloomberg report that First Republic is considering an asset sale. The stock was halted for volatility during the session but faced ongoing selling pressure after it reopened and finished near its lows for the session.
UPS’s earnings report contributed to the slowdown worries after the company lowered FY23 revenue guidance due to macroeconomic conditions and “changes in consumer behavior.” On a related note, the April Consumer Confidence Index was weaker than expected at 101.3, pressured by a drop in the Expectations Index.
The aforementioned catalysts offset any strength from other companies that reported earnings since Monday’s close. Namely, Dow component Verizon (VZ), PepsiCo (PEP), and Kimberly Clark (KMB) all logged gains as investors digested their quarterly results.
McDonald’s (MCD), which posted impressive results, closed down nonetheless on a sell-the-news reaction. Fellow Dow component Dow Inc (DOW) was confronted with selling pressure after reporting its Q1 results, which featured an 11% volume decline.
Reviewing Tuesday’s economic data:
- The FHFA Housing Price Index rose 0.5% in February from a revised 0.1% in January (from 0.2%)
- The S&P Case-Shiller Home Price Index fell to 0.4% in February from a revised 2.6% in January (from 2.5%)
- New home sales increased 9.6% month-over-month in March to a seasonally adjusted annual rate of 683,000 units from a downwardly revised 623,000 (from 640,000) in February. On a year-over-year basis, new home sales were down 3.4%.
- The key takeaway from the report is that new home sales activity is being helped by the tight supply of existing homes for sale, although affordability issues with higher prices and higher mortgage rates are still impeding stronger new home sales activity.
- The Conference Board’s Consumer Confidence Index for April fell to 101.3 from a downwardly revised 104.0 (from 104.2) in March. In the same period a year ago, the index stood at 108.6.
- The key takeaway from the report is that consumers were more pessimistic about the outlook for business conditions and the labor market, which translated into another sub-80.0 reading for the Expectations Index (the 13th out of the last 14 months). A level below 80.0, the Conference Board says, is a level associated with a recession within the next year.
Wednesday:
The major indices closed the session in mixed fashion, yet Wednesday’s trade skewed negative under the surface. Price action was especially disappointing when considering the 7.2% gain Microsoft (MSFT) registered after reporting earnings. The major indices had been moving higher early on thanks in large part to support from the mega cap space, but ultimately closed near their lows of the day. As the broader market declined, the negative price action itself became a driver of selling interest.
Even Alphabet (GOOG), which had been up as much as 2.3% after reporting better than expected/feared quarterly results, closed the session with a slim loss.
The negative bias was stemming from growth concerns, First Republic Bank’s (FRC) ongoing fallout, and misgivings about debt ceiling matters and the Fed’s policy path.
Relatively disappointing guidance from the likes of Texas Instruments (TXN) and Norfolk Southern (NSC), in addition to the 0.4% decline in nondefense capital goods orders in March — a proxy for business spending, piled onto the festering slowdown concerns.
Separately, the U.K.’s CMA said it will block Microsoft’s acquisition of Activision Blizzard (ATVI), which weighed heavily on the latter stock.
Reviewing Wednesday’s economic data:
- Weekly MBA Mortgage Applications Index 3.7%; Prior -8.8%
- March Durable Orders 3.2%; Prior was revised to -1.2% from 1.0%; March Durable Goods – ex transportation 0.3%; Prior was revised to -0.3% from 0.0%
- The key takeaway from the report, though, is that nondefense capital goods orders excluding aircraft — a proxy for business spending — declined 0.4% in March following a 0.7% decline in February.
- March Adv. Intl. Trade in Goods -$84.6 bln; Prior was revised to -$92.0 bln from -$91.6 bln
- March Adv. Retail Inventories 0.7%; Prior was revised to 0.3% from 0.8%
- March Adv. Wholesale Inventories 0.1%; Prior was revised to 0.1% from 0.2%
- The weekly EIA Crude Oil Inventories showed a draw of 5.05 million barrels after last week’s draw of 4.58 million barrels.
Thursday:
The stock market had a decidedly strong showing on Thursday. The major indices recouped all of their losses from Wednesday and then some, closing at their highs of the day. The broader market was boosted by a huge gain in Meta Platforms (META) after its earnings report, which helped foster a sense of relief that the mega-cap leaders are still performing relatively well from an operational standpoint and maintaining their position as market leaders.
As a result, other mega cap stocks logged outsized gains, driving a 2.6% gain in the Vanguard Mega Cap Growth ETF (MGK). There was also likely some short-covering activity driving price action in the mega caps. The Invesco S&P 500 Equal Weight ETF (RSP) rose by 1.6% and the market-cap weighted S&P 500 rose 2.0%.
The positive price action was also stemming from an improved economic outlook. Favorable earnings and/or guidance from the industrials sector and other companies, along with the healthy 3.4% increase in real final sales in Q1 and initial jobless claims that continue to run well below recession-like levels, helped to calm concerns about the economy being at imminent risk of a hard landing.
Dow component Honeywell (HON) was a standout from the industrials sector after it reported earnings. Notably, the S&P 500 industrial sector (+2.0%) closed near the middle of the pack despite sizable losses in Dow component Caterpillar (CAT), which easily beat Q1 earnings estimates but said second half sales could see an adverse dealer inventory impact, and in Southwest Airlines (LUV), which also reported earnings results.
Earnings-driven gains in META and Comcast (CMCSA) propelled the communication services sector to first place on the leaderboard by a big margin. The consumer discretionary (+2.8%), real estate (+2.4%), and information technology (+2.2%) sectors were also among the outperformers.
Reviewing Thursday’s economic data:
- The Advance Q1 GDP report wasn’t as underwhelming as it appeared to be at first blush. Real GDP increased at an annualized rate of 1.1% after increasing 2.6% in the fourth quarter.
- The GDP Price Deflator increased to 4.0% from 3.9%.
- The key takeaway from the report is that the deceleration in growth wasn’t because of weak consumer spending. On the contrary, personal consumption expenditure growth accelerated in the first quarter to 3.7% from 1.0% in the fourth quarter with spending on goods up 6.5% and spending on services up 2.3%. The hit to growth came from the change in private inventories. Real final sales of domestic product, which exclude the change in inventories, increased 3.4% from 1.1% in the fourth quarter.
- Initial jobless claims for the week ending April 22 declined by 16,000 to 230,000 while continuing jobless claims for the week ending April decreased by 3,000 to 1.858 million.
- The key takeaway from the report is that initial jobless claims remain a long way from the levels that have been seen in past recessions since 1980, when they have averaged north of 375,000.
- Pending home sales dropped 5.2% in March following a 0.8% increase in February.
- The weekly EIA Natural Gas Inventories showed a bulid of 79 bcf versus a build of 75 bc last week.
Friday:
The main indices were able to build on Thursday’s gains, closing near their highs of the session, despite a sizable decline in Amazon.com (AMZN) after the company cautioned about slowing cloud services growth after its better than expected Q1 report.
Nice gains from some blue chip names like Exxon (XOM), Colgate-Palmolive (CL), and Mondelez (MDLZ) supported the broader market while sharp earnings-related losses in Pinterest (PINS) and Snap (SNAP) kept the Nasdaq trailing its peers.
The market initially took a sharp turn lower after CNBC reported that First Republic Bank (FRC) is likely headed to receivership. Stocks bounced back quickly, however, signaling that the ongoing fallout at FRC is not viewed as a systemic issue. In fact, other bank stocks outperformed the broader market. The SPDR Regional Bank ETF (KRE) rose 1.7% and the SPDR Bank ETF (KBE) gained 1.4%.
Reviewing Friday’s economic data:
- The Q1 Employment Cost Index increased 1.2%, seasonally adjusted, for the three-month period ending in March 2023 following a revised 1.1% increase (from 1.0%) for the three-month period ending in December 2022. Wages and salaries, which account for about 70% of compensation costs, increased 1.2% following a revised 1.2% increase (from 1.0%).
- The key takeaway from the report is that labor costs didn’t show any meaningful signs of deceleration. On a 12-month basis, compensation costs for civilian workers increased 4.8% versus 4.5% in March 2022 while benefit costs increased 4.5% versus 4.1% in March 2022.
- There weren’t a lot of surprises in the March Personal income and Spending Report. Personal income increased 0.3% month-over-month and personal spending was flat. The PCE Price Index was up 0.1% and the core PCE Price Index, which excludes food and energy, was up 0.3%.
- The key takeaway from the report is that the core PCE Price Index, the Fed’s preferred inflation gauge, held fairly steady at persistently high levels, checking in at 4.6% year-over-year versus 4.7% in February. The stickiness of that component should keep the Fed sticking to its rate-hike ways.
- The Chicago PMI rose to 48.6 in April from 43.8 in March.
- The final University of Michigan Consumer Sentiment Index for April checked in at 63.5, unchanged from the preliminary estimate. The final reading for March was 62.0. In the same period a year ago, the index stood at 65.2.
- The key takeaway from the report is that consumer sentiment remains pinned at lower levels, stemming in part from inflation pressures that are dragging on attitudes about personal finances due to higher expenses.
Source: Briefing Investor
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Week in Review: Large-Cap Gains [April 29-23]
The S&P 500, Dow Jones Industrial Average, and Nasdaq all closed the last week of April with gains while the Russell 2000 logged a sizable decline. Investors received a huge slate of earnings news and economic data this week, which all reflected mixed activity. Those mixed results fueled a midweek sell-off before a strong rally effort during the last two sessions saw the market pick itself back up.
Earnings results from many mega cap stocks pulled a lot of focus this week. Namely, Alphabet (GOOG), Microsoft (MSFT), Meta Platforms (META), and Amazon.com (AMZN) all reported quarterly results. Unsurprisingly, their reports received mixed reactions from investors.
GOOG and AMZN declined on their earnings reports, with the latter warning about slowing cloud services growth, while MSFT and META rose sharply. Nonetheless, mega cap stocks a class made an outsized contribution to index level gains. The Vanguard Mega Cap Growth ETF (MGK) rose 1.9% on the week.
The continued outperformance of the mega caps helped foster a sense of relief that those names are still performing relatively well from an operational standpoint and maintaining their position as market leaders.
On the flip side, some earnings reports piled onto investors’ lingering growth concerns. Most notably, UPS (UPS), Dow component Dow Inc. (DOW), Texas Instruments (TXN), and Norfolk Southern (NSC) all disappointed with their earnings and/or guidance.
Ongoing fallout at First Republic Bank (FRC) following its disappointing earnings report, which featured a 40% decline in deposits, renewed lingering worries about banks facing higher deposit costs and tighter lending standards, potentially impeding on economic growth prospects. Notably, the market bounced back quickly from a sharp decline after CNBC reported that FRC is likely headed to receivership, indicating that issues at FRC are not viewed as systemic.
Economic data this week showed signs of weakness, yet there was no clear signal that the economy is deteriorating rapidly. The advance Q1 GDP report didn’t look great on the surface with real GDP increasing at an annualized rate of 1.1% after increasing 2.6% in the fourth quarter. However, personal consumption expenditure growth accelerated in the first quarter to 3.7% from 1.0% in the fourth quarter.
The March Durable Orders report contributed to slowdown concerns due to a 0.4% decline in nondefense capital goods orders in March — a proxy for business spending. Separately, the labor market remains strong as evidenced by the initial jobless claims remaining a long way from the levels that have been seen in past recessions since 1980.
The S&P 500 communication services sector (+3.8%) was the top gainer this week by a big margin, followed by information technology (+2.4%) and real estate (+1.5%). The utilities (-1.0%) and industrials (-0.6%) sectors logged the biggest declines.
Treasuries logged gains across the curve this week. The 2-yr note yield fell 10 basis points to 4.06% and the 10-yr note yield fell 12 basis points to 3.45%. The U.S. Dollar Index closed the week flattish at 101.68.
Below are truncated summaries of daily action:
Monday:
The stock market had another lackluster showing on Monday. Investors remained in wait-and-see mode ahead of some market-moving earnings news and economic data later this week. The main indices logged only modest gains or losses, ultimately settling the session in mixed fashion.
The hesitancy on Monday came ahead of a slate of important economic data this week, including the Fed’s preferred inflation gauge on Friday (the March core-PCE Price Index), along with earnings results from Alphabet (GOOG) and Microsoft (MSFT) on Tuesday, Meta Platforms (META) on Wednesday, and Amazon.com (AMZN) on Thursday.
Without a lot of market-moving catalysts, mega cap stocks drove a lot of the index level price action. The Vanguard Mega Cap Growth ETF (MGK) was down 0.2% while the Invesco S&P 500 Equal Weight ETF (RSP) rose 0.2% and the market-cap weighted S&P 500 was up 0.1%.
Dow component Coca-Cola (KO) initially moved higher as investors digested a better-than-expected Q1 earnings report, but KO gave back those early gains to close with a slim loss.
There was no U.S. economic data of note on Monday.
Tuesday:
Stocks had been languishing in tight trading ranges for several sessions before finally making an outsized move on Tuesday. The major indices all registered decent losses despite roughly 75% of companies reporting quarterly results since Monday’s close topping earnings expectations.
Growth concerns drove Tuesday’s price action following First Republic Bank’s (FRC) disappointing earnings results that included a 40% decline in deposits and downbeat guidance from UPS (UPS).
FRC’s earnings report renewed lingering worries about banks facing higher deposit costs and tighter lending standards, which would impede economic growth prospects. Sentiment around FRC deteriorated further following a Barron’s report that a team of wealth advisors managing $13 billion in assets is said to be leaving the bank, and a Bloomberg report that First Republic is considering an asset sale. The stock was halted for volatility during the session but faced ongoing selling pressure after it reopened and finished near its lows for the session.
UPS’s earnings report contributed to the slowdown worries after the company lowered FY23 revenue guidance due to macroeconomic conditions and “changes in consumer behavior.” On a related note, the April Consumer Confidence Index was weaker than expected at 101.3, pressured by a drop in the Expectations Index.
The aforementioned catalysts offset any strength from other companies that reported earnings since Monday’s close. Namely, Dow component Verizon (VZ), PepsiCo (PEP), and Kimberly Clark (KMB) all logged gains as investors digested their quarterly results.
McDonald’s (MCD), which posted impressive results, closed down nonetheless on a sell-the-news reaction. Fellow Dow component Dow Inc (DOW) was confronted with selling pressure after reporting its Q1 results, which featured an 11% volume decline.
Reviewing Tuesday’s economic data:
Wednesday:
The major indices closed the session in mixed fashion, yet Wednesday’s trade skewed negative under the surface. Price action was especially disappointing when considering the 7.2% gain Microsoft (MSFT) registered after reporting earnings. The major indices had been moving higher early on thanks in large part to support from the mega cap space, but ultimately closed near their lows of the day. As the broader market declined, the negative price action itself became a driver of selling interest.
Even Alphabet (GOOG), which had been up as much as 2.3% after reporting better than expected/feared quarterly results, closed the session with a slim loss.
The negative bias was stemming from growth concerns, First Republic Bank’s (FRC) ongoing fallout, and misgivings about debt ceiling matters and the Fed’s policy path.
Relatively disappointing guidance from the likes of Texas Instruments (TXN) and Norfolk Southern (NSC), in addition to the 0.4% decline in nondefense capital goods orders in March — a proxy for business spending, piled onto the festering slowdown concerns.
Separately, the U.K.’s CMA said it will block Microsoft’s acquisition of Activision Blizzard (ATVI), which weighed heavily on the latter stock.
Reviewing Wednesday’s economic data:
Thursday:
The stock market had a decidedly strong showing on Thursday. The major indices recouped all of their losses from Wednesday and then some, closing at their highs of the day. The broader market was boosted by a huge gain in Meta Platforms (META) after its earnings report, which helped foster a sense of relief that the mega-cap leaders are still performing relatively well from an operational standpoint and maintaining their position as market leaders.
As a result, other mega cap stocks logged outsized gains, driving a 2.6% gain in the Vanguard Mega Cap Growth ETF (MGK). There was also likely some short-covering activity driving price action in the mega caps. The Invesco S&P 500 Equal Weight ETF (RSP) rose by 1.6% and the market-cap weighted S&P 500 rose 2.0%.
The positive price action was also stemming from an improved economic outlook. Favorable earnings and/or guidance from the industrials sector and other companies, along with the healthy 3.4% increase in real final sales in Q1 and initial jobless claims that continue to run well below recession-like levels, helped to calm concerns about the economy being at imminent risk of a hard landing.
Dow component Honeywell (HON) was a standout from the industrials sector after it reported earnings. Notably, the S&P 500 industrial sector (+2.0%) closed near the middle of the pack despite sizable losses in Dow component Caterpillar (CAT), which easily beat Q1 earnings estimates but said second half sales could see an adverse dealer inventory impact, and in Southwest Airlines (LUV), which also reported earnings results.
Earnings-driven gains in META and Comcast (CMCSA) propelled the communication services sector to first place on the leaderboard by a big margin. The consumer discretionary (+2.8%), real estate (+2.4%), and information technology (+2.2%) sectors were also among the outperformers.
Reviewing Thursday’s economic data:
Friday:
The main indices were able to build on Thursday’s gains, closing near their highs of the session, despite a sizable decline in Amazon.com (AMZN) after the company cautioned about slowing cloud services growth after its better than expected Q1 report.
Nice gains from some blue chip names like Exxon (XOM), Colgate-Palmolive (CL), and Mondelez (MDLZ) supported the broader market while sharp earnings-related losses in Pinterest (PINS) and Snap (SNAP) kept the Nasdaq trailing its peers.
The market initially took a sharp turn lower after CNBC reported that First Republic Bank (FRC) is likely headed to receivership. Stocks bounced back quickly, however, signaling that the ongoing fallout at FRC is not viewed as a systemic issue. In fact, other bank stocks outperformed the broader market. The SPDR Regional Bank ETF (KRE) rose 1.7% and the SPDR Bank ETF (KBE) gained 1.4%.
Reviewing Friday’s economic data:
Source: Briefing Investor
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
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