Notes Along the Path: Market Update for Week 16

Gordon Achtermann |

Market Recap


The S&P 500 index fell 3% this week, led by the technology and consumer discretionary sectors, as investors digested a mixed round of quarterly financial results and escalating turmoil in the Middle East.

The market benchmark ended Friday's session at 4,967.23, the third straight weekly decline.

The S&P 500 is down 5.5% this month. However, it is still in positive territory for 2024, with a year-to-date rally of 4.1%, shrinking from the 10% gain at the end of March.

Note: In most years, the S&P 500 drops 10% or more from its prior high. This is all completely normal.

This week's drop came amid a mixed round of corporate results. Among the S&P 500 components that released quarterly reports this week, 79% had better-than-expected earnings, while only 55% had better-than-forecast revenue, according to Bloomberg data.

Adding to investor concerns, Chicago Fed President Austan Goolsbee said the Federal Reserve's progress in easing inflationary pressures has "stalled," and it "makes sense" to extend the pause rather than cut interest rates.

Tumult in the Middle East, where Israel launched a retaliatory strike on Iran, also weighed on the market as investors worried about potential impacts on oil supplies and energy prices.

The technology sector posted the largest percentage drop this week, sliding 7.3%. It was followed by a 4.5% drop in consumer discretionary, a 3.6% decline in real estate, and a 3.2% skid in communication services. Other sectors posting declines included industrials, energy, materials, and health care.

Super Micro Computer (SMCI) shares led the tech slide, tumbling 20% on the week, as the company announced its fiscal Q3 earnings release date without offering preliminary results for the quarter, disappointing investors. The company had released preliminary Q2 results about 11 days before full earnings, boosting its sales outlook.

Weighing down the consumer discretionary sector, shares of Tesla (TSLA) dropped 14% as analysts said Chief Executive Officer Elon Musk must address key issues next week, including the debate around the Model 2 vehicle and robotaxis as well as his recent 25% ownership remarks, to ease investor concerns amid waning electric vehicle demand. This comes after the company posted lower Q1 deliveries that missed analysts' expectations earlier this month.

In real estate, shares of Prologis (PLD) fell 13% as the logistics real estate investment trust reported Q1 core funds from operations and revenue that only matched Street views and tempered expectations for the full year amid a slowdown in leasing activity.

Three sectors climbed this week. Utilities rose 1.9%, consumer staples increased 1.4% and financials edged up 0.8%.

Gainers in the utilities sector included shares of Consolidated Edison (ED), which rose 3.5% as the energy delivery company maintained its quarterly dividend rate.


Band Market Update

The treasury yield curve is still slightly inverted, but less so than 1 year ago, and it continues to gradually flatten. The April 20222 curve is more consistent with a normal market.


Up Next

Next week, earnings reports are expected from a number of heavyweight companies including Verizon Communications (VZ), Visa (V), Tesla, Pepsico (PEP), GE Aerospace (GE), Meta Platforms (META), International Business Machines (IBM), AT&T (T), Boeing (BA), Microsoft (MSFT), Alphabet (GOOGL), Merck (MRK), Caterpillar (CAT), Exxon Mobil (XOM) and Chevron (CVX).

Economic data due next week will feature Q1 gross domestic product as well as the latest consumer price index, a closely watched inflation reading. Other reports expected next week include March new home and pending home sales as well as durable goods orders.


Stay the course.


All the Best!

Gordon Achtermann, CFP®