On Friday, a sharp sell-off sent major stock market indices into negative territory for the week, capping a volatile close to April.
The Standard & Poor’s 500 tumbled 3.27% (nearly all of that on Friday), while the Dow Jones Industrial Average declined 2.47%. The Nasdaq Composite index dropped 3.93% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 3.33%.1,2,3
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. Amazon and Tesla (TSLA) were the worst-performing mega-cap stocks with Amazon losing 14% in value for the week, and shares of Tesla undermined by CEO Elon Musk's $8.5 billion sale of his personal stock to help finance his $44 billion Twitter (TWTR) acquisition.
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 (including me) expect the economy to resume its expansion for the remainder of the year, which may be one reason investors shrugged off the negative surprise.4
How to Respond?
As you may know, I don't think it's productive to try and time the market - I don't know if stocks are going to continue their decline, so any call to move to cash is counterproductive. However, I do not recommend adding new money to stock portfolios while I am keeping alert for signs that it's time to rebalance and buy more stocks. I see two possibilities.
One, would be a major policy shift reminiscent of March 2020. If you remember, stocks had plunged rapidly as COVID-19 became a pandemic. For weeks the Trump administration denied reality and the Fed was non-responsive. Then about March 23rd both began to take the problem seriously and the market began it's long climb back up. Similarly, in 2009 the markets hit bottom in March shortly after the automobile industry rescue plan passed through Congress and it became clear that a roughly $1 Trillion stimulus was going to become law.
Later this year, when the Fed decides it is done raising interest rates, that shift should create a buying opportunity.
The other possibility would be that at some point the great majority of flighty investors may have exited from stocks, caused by a kind of irrational pessimism setting in and creating a great buying opportunity.
This Week: 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.
Source: Econoday, April 29, 2022
This Week: 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).
Source: Zacks, April 29, 2022
"For life: It is rather a determination not to be overwhelmed. For work: The truth can only be recalled, never invented."
– Marilyn Monroe
Beware of Ghost Preparers
No, this isn’t an idea for your next Halloween costume. Ghost preparers are people who don’t sign the tax returns that they prepare, which is both unethical and illegal. All paid preparers must sign and include their Preparer Tax Identification Number (PTIN) on the return, and if they don’t, this is a big red flag. These preparers might also promise unrealistic refunds or charge fees based on the size of the refund.
If you use a tax preparer, always vet them wisely. The IRS also has a page dedicated to helping taxpayers choose a reputable tax professional on IRS.gov and a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
Two Leg Stretches to Try at Your Desk
We spend so much time sitting at our desks, so it’s good to get some stretches here and there, especially if you have a long day. The good news is that you don’t even have to leave your desk to get these two stretches in!
Hip and Knee Flexion Stretch
Tip adapted from Healthline6
What is the number missing within this sequence? 4, 7, 11, 18, 29, 47, __, 123, 199, 322.
Last week’s riddle: Wilson, Xavier, Yolanda, and Zach are standing in line at the market. See if you can figure out their order from these clues: Yolanda is between Wilson and Xavier, Zach is next to Wilson, and Xavier is not first. Answer: Zach is first, Wilson is second, Yolanda is third, and Xavier is fourth.
Grand Prismatic Spring, Midway Geyser Basin, Yellowstone National Park, Wyoming
Footnotes and Sources
2. The Wall Street Journal, April 29, 2022
3. The Wall Street Journal, April 29, 2022
4. CNBC, April 28, 2022
5. IRS.gov, February 17, 2021
6. Healthline.com, February 22, 2022
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Weekly Market Insights: Economy Slows; Stocks Retreat
May 02, 2022