THE WEEK ON WALL STREET
On Friday, a sharp sell-off sent major stock market indices into negative territory
for the week, capping a volatile close to April. The Dow Jones Industrial Average
declined 2.47%, while the Standard & Poor’s 500 tumbled 3.27%. The Nasdaq
Composite index dropped 3.93% for the week. The MSCI EAFE index, which tracks
developed overseas stock markets, fell 3.33%.
Trading was volatile in the final week of April as investors struggled with the
crosscurrents of global economic growth anxieties stemming from widening
COVID-related lockdowns in China and a fresh batch of corporate earnings reports.
Monday set the tone for the week. Stocks staged an intraday reversal, wiping out a
deep morning decline to end the day higher. After broad losses on Tuesday and a
choppy session on Wednesday, stocks mounted a powerful rally Thursday thanks to
positive corporate earnings reports, overcoming a disappointing first-quarter Gross
Domestic Product report. Stocks could not sustain Thursday’s momentum, as
Friday witnessed a broad-based retreat to cement another week of losses.
Following the torrid 6.9% annualized GDP growth rate in the fourth quarter,
economists had expected economic growth to moderate to about a one-percent gain
in the first quarter. Instead, the economy shrank at an annualized rate of 1.4%,
dented by a slowdown in inventory investment by businesses, a jump in the trade
deficit, and a decline in defense spending. Consumer spending held up, rising 2.7%,
though the gain was amid higher prices. Some economists expect the economy to
resume its expansion for the remainder of the year, which may be one reason
investors shrugged off the negative surprise.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Institute for Supply Management (ISM) Manufacturing Index.
Tuesday: Factory Orders. Job Openings and Turnover Survey (JOLTS).
Wednesday: Federal Open Market Committee (FOMC) Announcement. Automated
Data Processing (ADP) Employment Report. Institute for Supply Management
(ISM) Services Index.
Thursday: Jobless Claims.
Friday: Employment Situation.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Advanced Micro Devices, Inc. (AMD), Pfizer, Inc. (PFE), Starbucks
Corporation (SBUX), Marathon Petroleum Corporation (MPC), Skyworks
Solutions, Inc. (SWKS), Prudential Financial, Inc. (PRU).
Wednesday: CVS Health Corporation (CVS), Twilio, Inc. (TWLO), Fortinet, Inc.
(FTNT), eBay, Inc. (EBAY), Booking Holdings, Inc. (BKNG), Match Group, Inc.
Thursday: Block, Inc. (SQ), Illumina, Inc. (ILMN), Shopify, Inc. (SHOP), Pioneer
Natural Resources Company (PXD), ConocoPhillips (COP), AnheuserBusch InBev
(BUD), Albemarle Corporation (ALB), Vertex Pharmaceuticals, Inc. (VRTX),
Kellogg Company (K), Air Products and Chemicals (APD).
Investor sentiment is a multi-decade lows. Historically, this has been a good
contrarian indicator of better things to come 6-12 months out. Warren Buffet,
chairman of Berkshire Hathaway, has invested around $50 billion of the $150
billion in cash the company was holding in just the last few months. A famous quote
of his is “When others are greedy be nervous, and when others are nervous be
greedy.” Obviously, with billions and billion of dollars, he can afford to be
patient. However, the same principle applies to most all investors. Panic selling has
never been a profitable endeavor.
I will agree the market is frustratingly painful the past few months. There are
various headwinds for the market. Many of those headwinds are priced in and
negative sentiment can push the market to the extreme. I would not venture to pick
where the market might bottom, but I also know panic selling could push things a
bit lower from here. While painful in the short term, a flush out is a good sign for
longer term investors.
If your situation has changed, please let us know. Otherwise know we are closely
monitoring the markets and will make adjustments as needed to maintain our long
term goals, but won’t have knee jerk reactions either. The Fed meeting on
Wednesday is likely to move markets in one direction or another depending upon
the commentary. Stay tuned.
Have a good week!
THIS WEEK'S UPDATE
May 02, 2022|