Markets Get Pummeled as Bears Return

During the past week of trading, which only featured four trading days, it was truly a tale of two halves. As the market opened on Tuesday, investors looked to build on constructive movement from the prior week and the S&P 500 logged two new all-time closing highs. However, come Thursday morning, the worm began to turn as the highly anticipated Q4 earnings report from Walmart, Inc. was revealed in the pre-market hours. While WMT delivered strong results, it was more so their guidance for the coming fiscal year that caught the attention of markets. WMT reported guidance for FY 2026, that was much softer than what analysts had anticipated. As the largest retailer in the world, WMT reporting disappointing forward guidance only stoked fears of a potential slowdown in U.S. consumer spending as it came on the heels of a January retail sales report that missed badly to the downside in the week prior. This fear was only compounded the following morning when the final consumer sentiment print for February reported a significant MoM slide, much more than the expectation. These fears about U.S. consumer spending and the earnings consequences moving forward arose midweek simultaneously as many pockets of momentum in the market finally broke and began to give back some gains. This all culminated in a large spike in the $VIX and a decisively red day in the markets on Friday where all three of the major averages declined by 1.60% or more. After Friday’s decline, the S&P 500 index has now fully roundtripped the post-Inauguration gains that we experienced and has fallen in three of the past four weeks. Now, despite the dour market performance to end the week, the S&P 500 index is only about 2.2% off of its all-time high made earlier in the week. So, this decline as of Friday’s market close appears to be nothing more than a garden variety pullback in a time of heightened uncertainty. Furthermore, in the context of the late-week sell-off, some of the market internals are still holding steady. The percentage of S&P 500 companies trading above their 200-day moving average did not decline and instead remained at 59%. Additionally, even with the heavy selling on Friday, the NYSE Advance Decline index failed to make a new short-term low. These market internals still showing signs of support were one bright spot in the midst of the declines. The coming week is going to be a major bellwether in determining the direction of stocks over the next few months as a few major reports are due that will certainly move the market one way or another. It is our team’s opinion that should these upcoming reports deliver the results Wall St. is looking for then stocks could likely begin to stabilize and start to move higher yet again. However, should these reports produce disappointing results, then we could be in for a bit deeper move to the downside before finding support.

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Key Events to Watch this Week

Pivotal Q4 Earnings (NVDA, CRM, Retail Earnings)
January PCE Inflation Report
Initial Jobless Claims

Following the return of volatility to markets last week, the keys events of this coming week now carry an even heavier weight when it comes to the direction of markets. Of the numerous significant events scheduled this week, hands down the one we believe that will have the most riding on it will be when Nvidia Corp. reports their Q4 earnings on Wednesday after the market close. NVDA and many of the other companies that are closely tied to the A.I. computing build-out have experienced stalling momentum of late. A convincingly strong report from NVDA could buoy this section of the market and perhaps reignite their rally. However, should NVDA’s report disappoint, this would likely contribute to a further decline in many of these names. Now, NVDA is not the only notable company set to report earnings in the coming week. Also, on Wednesday after the market close, Salesforce, Inc., will report their earnings. CRM’s report will also carry a significant weight for the market. The final thing to watch on the earnings front this week will be a number of retailers set to report their earnings. Now that we have gotten a few negative stories in a row from the retail space, these companies’ results and commentary around their forward guidance will be closely parsed by investors looking for any additional signs of economic weakness. On Friday, another of the major events this week will occur when the January PCE inflation report is posted. Recent inflation prints have come in hotter than expected and now that tariff-induced inflation fears appear to be cropping up yet again, investors will be anxiously waiting to digest this report. The final event this week that we are dialed in on will be Thursday’s weekly Initial Jobless Claims. We have not seen a large uptick in new claims recently, however, as has been well documented, many Federal employees’ employment has been terminated, and this has not showed many signs of slowing down yet. At some point, this is going to make its way into employment data, so we are watching for any signs of potential labor market deterioration. After correctly guessing last week that the market was primed to break out to fresh highs, this prediction did come to fruition in short order only for markets to quickly fade later in the week. At present, where the market currently finds itself, a lot will be riding on positive results in this week’s major events. These crucial reports could serve as a lifeline for a market where momentum has quickly stalled amid a spike in volatility. Investors will be eager for favorable results this week, or we could be in for a bit further decline before stocks find support.

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.

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