Last week, investors witnessed some of the selling pressures in the market intensify as the S&P 500 & Nasdaq indices finished the week down 5.7% & 7.6% respectively from their all-time highs. All but one S&P 500 sector finished the week in the red and even though the selling pressure was fairly broad, the selling was most highly concentrated in the Technology sector, which was down 5.81% on the week. Despite the strong decline we witnessed last week, on Friday 66% of S&P 500 stocks finished the day higher. Since many of the most heavily weighted stocks in the S&P 500 are tech or tech-adjacent stocks, this concentrated selling had an outsized effect on the index. Looking at longer term trends, still 68% of S&P 500 stocks are above their 200-Day moving average, indicating a long-term upward trend in the market. With the recent sharp sell-off, a few indicators are signaling that we have likely approached oversold territory, at least in the short term. Additionally, the market finds itself at a few key support levels. Due to these factors, a bounce may be in store for the market over the next week or two.

This week brings us some crucial new economic data as well as significant earnings on the heels of last week’s strong sell-off.  These market events are likely to be the next handful of catalysts that will determine the market’s next actions. On deck this week in terms of economic data is the U.S. GDP number for Q1 as well as final University of Michigan Consumer Sentiment data for April. The economic report this week with the most riding on it is no doubt Friday’s PCE inflation report. Coupled with this high-stakes inflation report, there are a number of consequential earnings reports on deck this week. Some of the companies set to report this week include Microsoft Corp., Alphabet Inc., & Meta Platforms.

  • Gross Domestic Product (GDP) – Thursday morning will bring us the U.S. first quarter GDP report. GDP of course is a measure to track the total value of the goods and services produced in the country. The previous two quarter’s reports for Q3 & Q4 of ‘23 showed that the U.S. economy had grown Q/Q 4.9% & 3.4% respectively.
    • Forecasts project on average that U.S. GDP in the first quarter will have increased 2.2%.
  • Personal Consumption Expenditures Price Index (PCE) – To close out the trading week, on Friday, the new PCE & Core PCE data for the month of March will be released. The PCE price index data is gathered to track the costs that U.S. consumers are paying for goods and services and to document the change in these costs over time. Core PCE is a pared down measure that excludes more volatile categories like Food & Energy and this is the index the Fed watches the most closely. 
    • March’s YoY Core PCE number is expected to come in at 2.7%, which would be a touch lower than February’s report of 2.8%. With a string of recent hotter than expected inflation reports, the markets will be watching this report closely in hopes of a positive result.
  • Consumer Sentiment (MCSI) – Every month the University of Michigan conducts a household survey, and its purpose is to measure the U.S. consumer’s current feelings about the economy and their personal finances. Given that consumer spending makes up about 70% of U.S. GDP, the consumer’s current sentiment is a crucially important tool in forecasting short-term economic trends as consumer sentiment heavily influences spending. This survey is compiled to form an index, the MCSI, which can quantify sentiment trends.
    • In preliminary reports, April consumer sentiment looks to have decreased about 2% since March, with the early reports coming in at 77.9. Friday morning’s final report is expected to come in at the same level of 77.9. Despite the slight decrease, consumer sentiment is still up 27.1% over the past six months.
Don't Make these 5 Fatal Trading Mistakes, Click here to see what they are and avoid them.

Federal Reserve Watch

Last week featured various speaking events by Fed members including Fed Chair Powell. Chair Powell acknowledged that recent inflation data has proven to be a hurdle keeping the FOMC committee from arriving at their goal of beginning to lower the Fed Funds rate. In light of recent data, Powell expressed that he feels that the FOMC will now have to leave rates at present levels longer than initially expected. Additionally, Powell, along with other Fed members, communicated that they felt that the current policy level is sufficiently restrictive, seeming to rule out any further rate increases in this cycle. Last week served as further evidence that the Fed is resolute in their mission to bring down inflation to their target range of 2%. Also, they are willing to leave policy rates at current levels until they have seen sufficient evidence of inflation continuing to trend downward. The next FOMC meeting is set for May 1st, so this week will be quiet regarding Fed messaging as members will be in their pre-meeting ‘quiet period’.

  • Looking beyond the upcoming May FOMC meeting, Fed Funds Futures are pricing in only one policy rate cut through the end of the year. The CME’s FedWatch tool indicates that the absolute earliest that this rate cut could happen is at the September meeting. Currently, odds of a cut at the September meeting stand at 65.1%, however, this is down from 73.7% from this time last week. Investors seem to have stronger confidence that this cut will not occur until either November or December where the odds of a cut stand at 79.4% & 84.8% respectively. These probabilities from Fed Funds Futures data are reflective of recent market sentiment shifts in the number of rates cuts that investors are expecting this year. Coming into the year, the market was expecting six rate cuts and now due to recent developments, the expectation has been pared back to one.

This Week’s Notable Earnings

Thus far, Q1 earnings season has gotten off to a strong start with 74% of S&P 500 companies beating earnings expectations, however, share price reactions post-report have been a bit rockier. This phenomenon could be pivotal this week for the market due to some of the companies that are set to report. Four of the ‘Magnificent 7’ companies in Microsoft Corp., Alphabet Inc., Meta Platforms, Inc., & Tesla, Inc. are set to report. Joining these Mega-Cap names, both Visa Inc. & GE Aerospace will post their Q1 results. And finally, two major energy sector names, Exxon Mobil Corp. & Chevron Corp. will close the week out when they report their Q1 earnings on Friday. 

  • The first of the ‘Mag 7’ companies to report this week is Tesla, Inc., which will report on Tuesday after the market close. TSLA stock is in a serious bear market and in desperate need of a strong quarter to stage a turnaround. On Wednesday after the closing bell, Meta Platforms, Inc. will report their Q1 numbers. Finally, on Thursday once the market closes, both Microsoft Corp. & Alphabet Inc. will report their first quarter’s earnings.
    • MSFT earnings are expected to come in at $2.83 EPS.
    • GOOGL earnings are expected to come in at $1.51 EPS.
    • META earnings are expected to come in at $4.32 EPS.
    • TSLA earnings are expected to come in at $0.35 EPS.
  • Next, there are two large-cap companies from different sectors that are due to report this week that our team will be watching closely. On Tuesday prior to the market open, GE Aerospace will report their Q1 earnings. GE is expected to post YoY Q1 EPS growth of 155.6% according to analysts. Then after the bell, credit card giant, Visa Inc. will post their latest quarterly earnings. Analyst’s expectations are that V will report a 16.7% YoY increase in their Q1 EPS.
    • GE earnings are expected to come in at $0.69 EPS.
    • V earnings are expected to come in at $2.44 EPS.
  • Finally, on Friday morning, prior to the opening bell two U.S. energy giants, Exxon Mobil Corp. & Chevron Corp will both reveal their Q1 earnings. XOM and CVX each are forecast to report Q1 earnings that are slightly lower when compared to last year. However, in the midst of an oil price spike, investors will likely be more excited to hear the guidance from each company.
    • XOM earnings are expected to come in at $2.22 EPS.
    • CVX earnings are expected to come in at $2.91 EPS.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.


Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team

AI? Bitcoin? Struggling to make sense of it all? Click here for a proven method that works for me.