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%. STOCKS SLIDE 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. ECONOMY CONTRACTS 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. (MTCH). 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). FINAL THOUGHTS 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
