THE WEEK ON WALL STREET
The crosscurrents of strong corporate earnings, rising global cases of COVID-19, and the specter of higher capital gains taxes led to a choppy week of trading that left stock prices slightly lower for the week. The Dow Jones Industrial Average lost 0.46%, while the Standard & Poor’s 500 slipped 0.13%. The Nasdaq Composite index fell 0.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 0.47%.
A DIRECTIONLESS WEEK
Despite continued better-than-expected corporate earnings, stocks retreated as concerns over rising global COVID-19 infections weighed on investor sentiment. A mid-week rally erased much of these losses, with reopening stocks and small cap companies leading the market. The stock market resumed its decline in reaction to reports that President Biden supported a capital gains tax increase on wealthy Americans. The Biden news prompted worries that stocks could come under pressure this year if such an increase were to go into effect next year. Solid economic reports, along with a reassessment of the capital gains news, helped stocks to bounce back and close out the week on a positive note.
HOUSING SHOWS STRENGTH
Two housing market reports last week reflected strong consumer demand for homes. Sales of new homes in March jumped by 20.7% from February and by more than 66% from last March, reaching levels not seen since 2006. All regions recorded double-digit gains, except for the West, which experienced a decline of 30%. Though existing home sales fell 3.7%, it wasn’t for lack of consumer interest, as evidenced by the 18-day average to sell a home. The decline was largely an issue of tight inventories. This demand/supply imbalance drove median home prices higher by 17.2% from March 2020 to $329,100.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Durable Goods Orders.
Tuesday: Consumer Confidence.
Wednesday: Federal Open Market Committee (FOMC) Announcement.
Thursday: Jobless Claims. Gross Domestic Product (GDP).
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Tesla, Inc. (TSLA).
Tuesday: Microsoft (MSFT), Advanced Micro Devices, Inc. (AMD), Visa (V), Alphabet, Inc. (GOOGL), Starbucks (SBUX), Amgen, Inc. (AMGN), Eli Lilly and Company (LLY), 3M Company (MMM), Texas Instruments (TXN), United Parcel Service (UPS), Mondelez International (MDLZ).
Wednesday: Apple, Inc. (AAPL), Facebook (FB), Boeing (BA), Ford Motor Company (F), Qualcomm (QCOM), Shopify, Inc. (SHOP), Servicenow, Inc. (NOW), Teladoc Health, Inc. (TDOC), Ebay (EBAY).
Thursday: Amazon.com (AMZN), Twitter, Inc. (TWTR), Mastercard (MA), Bristol Myers Squibb (BMY), Caterpillar, Inc. (CAT), Merck & Company (MRK), McDonald's Corporation (MCD), Comcast Corporation (CMCSA), American Tower Corporation (AMT).
Friday: Abbvie, Inc (ABBV), Chevron (CVX), Charter Communications (CHTR).
The big news item this week beyond corporate earnings is what the Fed says about interest rates on Wednesday. The Fed must manage a difficult balancing act of keeping the economy moving forward without letting inflation get too hot. Ask anyone who has tried to buy lumber or copper lately and they will tell you prices are going up very fast. Initially, Jerome Powell thought this inflation would be transitory. However, the FOMC doesn't want to let it get away from them either. They would have to slam on the brakes of the economy if inflation were to start to run up faster than anticipated. Therefore, some think they may want to tap the brakes here and there to have less of a negative affect on the economy and markets. I doubt they would raise rates this week, but they could start to change their tone which would have the same affect initially. Stay tuned.
Have a great week!