After a bruising five days last week, it was hard to speculate what would happen this week. Would we see more of the same? Would the bulls wrestle control of the market and push us higher? Or would it be something in between? As we wrap up this week, it looks like the last answer was the best in what can only be described as a wild week. Let’s look at a few of the key drivers:
- Overall, markets rebounded strongly on Monday and Tuesday as investors looked to shake off the prior week’s correction. The S&P 500 was up over two percent in the first two days on little more than “dip buying.”
- Tesla (TSLA) reported earnings on Tuesday evening, and on its face, it seemed like a lackluster report. Revenue was down 9% YoY, below expectations. Gross margin, operating margin, and free cash flow all dropped considerably. And if that wasn’t enough, they noted that 2024 vehicle sales growth rates were likely to be notably lower than 2023. What happened to the stock price? It jumped 12% the next day.
- Meta (META) released earnings on Wednesday evening, reporting $36.5 billion in revenue and $4.71 in earnings per share. Both handily beat Wall Street consensus estimates. What happened to the stock price? It promptly dropped 11% the next day, dragging the major indices along with it.
- Before markets opened on Thursday, the U.S. Bureau of Economic Analysis (BEA) released the advanced read on Q1 GDP. One analyst described the report as the “worst of both worlds report” after showing a significant slowdown in GDP (1.6% vs. 3.4% last quarter and 2.5% expected) and higher prices (Core PCE prices up 3.7% vs. 2.0% last quarter). The market did not take kindly to the news, with equities down and bond yields up.
- Alphabet (GOOGL) released earnings on Thursday evening, and by all accounts, they were excellent. Revenue was up 15% YoY to almost $81 billion, and net income was up 57% to nearly $24 billion. In addition, they announced their first-ever dividend, which, combined with the results, sent the stock soaring up over 10% in after-hours trading. The momentum helped drive Friday’s performance across all equity markets.
- Core PCE (the Fed’s preferred inflation gauge) was released Friday morning and broadly aligned with expectations. The month-over-month readings were all as expected; however, the year-over-year numbers came in slightly higher. Even with all the concern about inflation, market participants seemed to shrug their collective shoulders, perhaps because this was considered “old news.”
Put it all together, this week was just another fantastic example of how difficult (read: impossible) it is to predict where the market will go next. One bad week does not necessarily mean we’re on the verge of a significant correction, and a week where the market bounces back does not invariably imply we are about to start a new raging bull market. Moreover, even if you “know” a company will have an excellent (or poor) earnings release, you still don’t know how the market will react. Remember, always stay calm, stay humble, follow your plan, and try to enjoy the fruits of your labor.
Economy
- Markets rallied during a wild week as Mega Cap earnings battled for headlines with big economic news. The S&P 500 was up 2.7%, the Nasdaq was up 4.2%, and the small-cap Russell 2000 was up 2.8%.
- U.S. personal income rose by 0.5% MoM in March, accelerating from a 0.3% increase in the previous month, but in line with market expectations.
- Personal spending in the U.S. increased by 0.8% MoM in March, maintaining the same pace as February and surpassing market expectations of 0.6% growth.
- The University of Michigan consumer sentiment for the U.S. was revised lower to 77.2 in April compared to 79.4 in March.
Stocks
- U.S. equities were in positive territory. Technology and Consumer Discretionary were the top performers, while Materials and Healthcare lagged. Growth stocks led value stocks, and large caps beat small caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased five basis points to 4.67% during the week.
- Global bond markets were in negative territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
