Week in Review
Most asset prices fell last week, as modestly modestly higher interest rates pressured growth stocks, and a stronger US Dollar index dragged commodities lower. The NASDAQ led equities on the downside, falling 0.4%, while the S&P 500 index was nearly unchanged. The Dow Jones Industrial Average is the worst performing of the large cap indexes year-to-date, up only 2%. Bitcoin fell back below 30,000, crude oil dropped more than 5%, and gold prices declined 1%.
Earnings season is underway, and more than one-third of all S&P 500 constituents will report first quarter earnings this week. If consensus expectations are correct, they’ll show that company profits are declining for a second straight quarter. Back-to-back EPS declines would signal the first ‘earnings recession’ since 2020, when COVID lockdowns brought the global economy to a grinding halt. Margin pressures are primarily to blame for the projected 6% decline in corporate earnings.
Despite last week’s decline in stock prices, more than two-thirds of all S&P 500 companies are in short-term technical uptrends, as indicated by their current price relative to a 20-day average. On that short-term basis, only the Information Technology sector has fewer than 50% of its constituents in an uptrend.
Trends are broadly healthy on a long-term basis, too. More than half of the index members are trading above a 200-day average, led by Consumer Staples and Utilities. The weakest sectors are Real Estate, Financials, and Energy. The majority of stocks in each are mired in long-term downtrends.
There’s a flood of economic data coming this week, including the Fed’s preferred measure of price inflation, the PCE Deflator.