Everything to Know about Macro and Markets
Markets tumbled on Friday to close a rollercoaster of a week on a down note. The end-of-the-week declines were sparked by underwhelming earnings results at the largest U.S. banks, as well as rising geopolitical tensions and ongoing concern over the Federal Reserve’s monetary policy outlook.
The S&P 500 (SPX) notched its largest weekly decline since January, while the Dow Jones Industrial Average (DJIA) weekly loss was the worst since March 2023. Technology benchmarks Nasdaq Composite (NDAQ) and Nasdaq 100 (NDX) experienced far smaller declines, propped up by strong weekly performances of Alphabet (GOOGL) and Apple (AAPL).
Macro Moves the Markets
Wednesday’s Consumer Price Index (CPI) report reflected stronger-than-expected inflationary pressures, putting a question mark over the Fed’s ability to lower rates in the near future and sending stocks into a tailspin.
Thursday’s Producer Price Index (PPI) showed the smallest monthly increase since November, helping stocks to rebound. Still, its positive impact quickly dissipated after several Federal Reserve officials voiced their concern over inflation uncertainties. The central bankers underlined that there is no pressing need to cut interest rates, citing persistently high inflation and a strong job market.
In addition, April’s preliminary Michigan Consumer Sentiment Index fell significantly more than was expected, while Consumer Inflation Expectations rose, adding to worries over the conflicting signals muddying the picture for rate-setting policymakers.
Earnings Under the Spotlight
Three of the U.S. largest banks kicked off the earnings season on Friday. Front and center of the grand opening was the world’s largest financial institution, JPMorgan Chase (JPM). The financial behemoth reported higher-than-anticipated revenues and earnings, but its weak forecast for the full fiscal year 2024 net interest income spooked investors, sending the stock down almost 8% for the week. Both Citigroup (C) and Wells Fargo (WFC) surpassed revenue and earnings estimates but fell under the brunt of JPM-induced investor pullback from bank stocks.
The Week Ahead
Investors will continue to closely monitor the incoming economic data, including retail sales and industrial production, for additional data that could affect the Federal Reserve’s monetary policy. Following recent hotter-than-expected inflation figures, further signs of the economy’s strength would add to growing concerns that the Fed may leave its rates unchanged this year.
Markets will also focus on earnings, with this week’s releases spread between various economic sectors, and as such providing a somewhat better outlook into the season than the results from the large banks.
In addition, the Middle East conflict continues to draw attention, as increased tensions threaten to add to the upward pressure on oil prices. Crude has rallied over 20% this year, with the surge feeding into prices at the pump and overall inflation, putting further strains on consumers.
Notable Stock News
¤ Apple (AAPL) went against the grain last week, surging 4.4% after the tech giant revealed its decision to overhaul its Mac computers with a focus on AI applications.
¤ Alphabet (GOOGL) rose over 3% for the week after the company revealed its new Arm-based CPU “Axion” intended for use in AI training and inferencing. The new CPU will compete with those made by Microsoft (MSFT) and Amazon (AMZN), with the help of a chip infrastructure designer Arm Holdings PLC (ARM).
¤ Advanced Micro Devices (AMD) and Intel (INTC) tumbled following a report that Beijing ordered Chinese telecom firms to phase out foreign-made chips by 2027.
¤ Arista Networks (ANET) dropped over 8% after a Rosenblatt Securities analyst downgraded the stock to “Sell”, citing a potential market-share threat from Nvidia (NVDA) in AI-driven data center network switches.
Upcoming Earnings and Dividend Announcements
The Q1 2024 earnings season has begun in earnest, and several newsworthy earnings releases are scheduled for this week.
This week’s most important earnings event will be Netflix’s (NFLX) first-quarter results after Thursday’s close. After the streaming giant’s blockbuster Q4, expectations for this quarter’s results are running hot.
Other notable earnings reports this week will be published by Goldman Sachs (GS), UnitedHealth Group (UNH), Bank of America (BAC), Johnson & Johnson (JNJ), Morgan Stanley (MS), ASML Holding (ASML), and Procter & Gamble (PG).
Ex-Dividend dates are coming this week for Procter & Gamble (PG), Caterpillar (CAT), CVS Health (CVS), Colgate-Palmolive (CL), and other dividend-paying firms.
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