Hawkish comments from Fed Chair Jerome Powell overshadowed many largely positive earnings results, sending stocks lower for the week.
The Standard & Poor’s 500 dropped 2.75% to push the index into correction territory, while the Dow Jones Industrial Average declined 1.86%. The Nasdaq Composite index fell 3.83% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 0.50%.1,2,3
Focus Comes Off Earnings
With the inflation report in the rear-view mirror and a Fed meeting two weeks away, many may have expected corporate earnings to be in focus last week. Comments by Jerome Powell stole the spotlight.
Investors began the week awaiting earnings reports looking for insight into businesses handling the latest inflation, a jittery consumer, tighter monetary policy, and ongoing supply chain issues. Despite one high-profile earnings disappointment, corporate profits appeared better than expected. By the time trading began on Thursday, 17% of S&P 500 companies had reported, and 81% had beaten Wall Street analysts’ estimates. Investors responded positively, sending share prices higher until Powell’s comments on Thursday afternoon triggered selling into the day’s close and accelerated through Friday.4
Powell Unnerves Markets
On Thursday, at an event hosted by the International Monetary Fund, the Fed Chair offered his view that it may be appropriate to move more quickly on raising interest rates. He indicated that a 50 basis point hike was on the table for the Federal Open Market Committee (FOMC).5
His comments also emphasised the need to restore price stability, recalling the successful efforts of former Fed Chair Paul Volker, who used a series of rate hikes to tame the inflation of the 1970s and early 1980s. While some observers anticipated these comments, yields rose, and stocks fell in response.
Expectation (not predictions)
I suspect markets will bounce back this week on earnings reports, but of course we will see how supply chain issues impacted industrial giants reporting this week and how much the Fed comments alter earnings guidance given by tech giants like Microsoft and Google who report on Tuesday. As always, the virus or the war in Ukraine could put the focus on global uncertainty which could bring stocks down.
The availability of homes for sale has risen recently, so the count of new home sales may be up when those are reported on Tuesday, but the prices of home sales has likely peaked and will begin to drop soon due to soaring mortgage rates (5.11% for 30 years on 4/21 [https://www.freddiemac.com/pmms] - up exactly 2% from the end of 2021.)
This Week: Key Economic Data
Tuesday: Durable Goods Orders. Consumer Confidence. New Home Sales.
Thursday: Gross Domestic Product (GDP). Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, April 22, 2022
This Week: Companies Reporting Earnings
Monday: The Coca-Cola Company (KO).
Tuesday: Microsoft Corporation (MSFT), Visa, Inc. (V), Alphabet, Inc. (GOOGL), General Motors Company (GM), Archer Daniels Midland Company (ADM), 3M Company (MMM), Texas Instruments, Inc. (TXN), United Parcel Service, Inc. (UPS), D.R. Horton, Inc. (DHI), Chipotle Mexican Grill, Inc. (CMG).
Wednesday: Meta Platforms, Inc. (FB), The Boeing Company (BA), Ford Motor Company (F), Qualcomm, Inc. (QCOM), PayPal Holdings, Inc. (PYPL), Amgen, Inc. (AMGN), ServiceNow, Inc. (NOW), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Intel Corporation (INTC), Mastercard, Inc. (MA), Caterpillar, Inc. (CAT), Merck & Co., Inc. (MRK), McDonald’s Corporation (MCD), The Southern Company (SO), Eli Lilly and Company (LLY), Northrop Grumman Corporation (NOC).
Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Bristol Myers Squibb Company (BMY), Chevron Corporation (CVX), Honeywell International, Inc. (HON), Colgate-Palmolive Company (CL), L3Harris Technologies, Inc. (LHX).
Source: Zacks, April 22, 2022
"You don't need a weatherman to know which way the wind blows."
– Bob Dylan
Be On the Lookout for Unemployment Identity Theft Scams
With millions of people receiving unemployment, it’s no surprise that scammers are taking advantage of this situation and filing fraudulent claims for unemployment compensation. They do this by using stolen personal information of taxpayers who haven’t filed unemployment claims.
If you filed for unemployment and received an incorrect Form 1099-G, make sure to contact the issuing agency to request a revised form. You can also contact the IRS and request an identity protection PIN to protect your identity when filing your federal tax return. Make sure to also educate yourself on the many signs of identity theft and take the proper steps to protect yourself.
* 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.gov6
Tips for Making Cleaning Your Closet Easier
There’s something so satisfying about cleaning out your closest, especially during this time of year. Here are some tips on how to make spring cleaning your closet a little easier.
Tip adapted from Who What Wear7
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.
Last week’s riddle: How much dirt is in a 2-foot diameter hole that is 4 feet deep? Answer: No dirt at all. You have made a hole by digging out the dirt, so the hole is empty.
The Incan citadel of Machu Picchu, high in the Andes Mountains, Peru.
Footnotes and Sources
2. The Wall Street Journal, April 22, 2022
3. The Wall Street Journal, April 22, 2022
4. CNBC, April 21, 2022
5. CNBC, April 21, 2022
6. IRS.gov, February 24, 2021
7. whowhatwear.com, March 19, 2020
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Weekly Market Insights: Powell Favours Quick Movement
April 25, 2022