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THIS WEEK'S UPDATE

| April 26, 2022
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THE WEEK ON WALL STREET

Hawkish comments from Fed Chair Jerome Powell overshadowed many largely

positive earnings results, sending stocks lower for the week. The Dow Jones

Industrial Average declined 1.86%, while the Standard & Poor’s 500 dropped 2.75%.

The Nasdaq Composite index fell 3.83% for the week. The MSCI EAFE index, which

tracks developed overseas stock markets, advanced 0.50%.


FOCUS COMES OFF EARNINGS

With the inflation report in the rearview mirror and a Fed meeting two weeks away,

many may have expected corporate earnings to be in focus last week. Comments by

Jerome Powell stole the spotlight. Investors began the week awaiting earnings reports

looking for insight into businesses handling the latest inflation, a jittery consumer,

tighter monetary policy, and ongoing supply chain issues. Despite one high-profile

earnings disappointment, corporate profits appeared better than expected. By the time

trading began on Thursday, 17% of S&P 500 companies had reported, and most had

beaten Wall Street analysts’ estimates. Investors responded positively, sending share

prices higher until Powell’s comments on Thursday afternoon triggered selling into the

day’s close and accelerated through Friday.

POWELL UNNERVES MARKETS

On Thursday, at an event hosted by the International Monetary Fund, the Fed Chair

offered his view that it may be appropriate to move more quickly on raising interest

rates. He indicated that a 50 basis point hike was on the table for the Federal Open

Market Committee (FOMC).5

His comments also emphasized the need to restore price stability, recalling the

successful efforts of former Fed Chair Paul Volker, who used a series of rate hikes to

tame the inflation of the 1970s and early 1980s. While some observers anticipated

these comments, yields rose, and stocks fell in response.


THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Durable Goods Orders. Consumer Confidence. New Home Sales.

Thursday: Gross Domestic Product (GDP). Jobless Claims.

Friday: Consumer Sentiment.

THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS

Monday: The Coca-Cola Company (KO).

Tuesday: Microsoft Corporation (MSFT), Visa, Inc. (V), Alphabet, Inc. (GOOGL),

General Motors Company (GM), Archer Daniels Midland Company (ADM), 3M

Company (MMM), Texas Instruments, Inc. (TXN), United Parcel Service, Inc.

(UPS), D.R. Horton, Inc. (DHI), Chipotle Mexican Grill, Inc. (CMG).

Wednesday: Meta Platforms, Inc. (FB), The Boeing Company (BA), Ford Motor

Company (F), Qualcomm, Inc. (QCOM), PayPal Holdings, Inc. (PYPL), Amgen, Inc.

(AMGN), ServiceNow, Inc. (NOW), Norfolk Southern Corporation (NSC).

Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Intel Corporation

(INTC), Mastercard, Inc. (MA), Caterpillar, Inc. (CAT), Merck & Co., Inc. (MRK),

McDonald’s Corporation (MCD), The Southern Company (SO), Eli Lilly and

Company (LLY), Northrop Grumman Corporation (NOC).

Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Bristol Myers

Squibb Company (BMY), Chevron Corporation (CVX), Honeywell International,

Inc. (HON), Colgate-Palmolive Company (CL), L3Harris Technologies, Inc. (LHX).

FINAL THOUGHTS

179 companies are reporting earnings this week.


Of the 102 companies that have reported so far (20% of the S&P 500), overall results

are beating estimates by a median of 6%. And, 75% of those reporting are beating

estimates.

On the top line, overall results are beating estimates by a median of 3%. And, 66%

of those reporting so far are beating estimates.

So, if companies are beating earnings estimates, why is the market going down?

Well, there is much anxiety over interest rates going up and volatility is high. Many

are worried the Fed could push rates too high too fast and slow the economy too

much in their efforts to combat rising prices.

It feels bad to watch the market decline and see one’s account values decline in times

like these. Sometimes, our emotions can get the best of us. Emotional investment

decisions are rarely good ones. So, during times like these it is important to keep

one’s longer term goals in mind. For some, I realize long term is shorter than

others. A friend of mine who was in his 80’s at the time, would always tell me, “Nick,

I don’t buy green bananas.” And I totally get it. However, we always stress we do

not want to invest one’s money that could be needed in the near term into risk

assets. For funds that aren’t needed in the short term, we invest because we know

markets tend to do well over time and are one of our best tools to keep up with and

outpace inflation.

When volatility strikes it is important to remember eventually, this too shall pass. I

am not saying it will pass this week, it could be this way for several months.

However, stock markets are made up of real businesses we all patronize and will

continue support as we live our daily lives. They aren’t going to evaporate. Inflation

and interest rates will eventually stabilize and markets will once again begin their

march higher. Warren Buffet has always said, when others are greedy be nervous and

when others are nervous, be greedy. Investor sentiment is at longer term lows. I would

call that nervous.

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