The Stock Market Had A Mixed Showing This Week. The Major Indices All Registered Gains Compared To Last Week's Closing Levels, But Concerns About Inflation And Fed Policy Kept A Limit On Index Performance.
There was not a lot of big moves early in the week as investors awaited market-moving economic data followed by Q1 earnings reports from several large banks on Friday. Coinbase Global (COIN) was an exception in that regard, gaining 6.0% on Tuesday after Bitcoin breached $30,000.
Inflation concerns rose to the fore after investors received the Consumer Price Index (CPI) for March. Total CPI fell on a year-over-year basis, which was a welcome development, but core-CPI accelerated on a year-over-year basis. The total Producer Price Index (PPI) and core-PPI declined in March, but the uptick in core-CPI offset some excitement about PPI disinflation.
In addition, comments from Fed officials this week indicated that the latest inflation readings are not likely to convince the Fed to pause its tightening efforts just yet. Fed Governor Waller (FOMC voter) said in a speech before the open on Friday that the Fed hasn't made much progress on its inflation goal and that he thinks monetary policy needs to be tightened further and remain tight for a substantial period of time. Chicago Fed President Goolsbee (FOMC voter) did, however, indicate that he thinks the Fed needs to be cautious, given the uncertainty about where financial headwinds are going.
The data and commentary this week did not change the market's view that much in regards to the Fed's May FOMC meeting. According to the CME FedWatch Tool, the fed funds futures market is pricing in a 77.5% probability of a 25 basis points rate hike in May, up from 71.2% a week ago. The disinflation seen in economic data this week was not enough to offset the core-CPI acceleration and negative sentiment driven by Fed official commentary.
Market participants had been anxiously awaiting the start of Q1 earnings season on Friday. JPMorgan Chase, Citigroup, BlackRock, and PNC Financials all finished Friday's session with a gain after pleasing investors with Q1 results.
Strength from the financial sector was not enough to carry the market on Friday, though, as policy expectations and rate hike concerns drove price action. A few widely held stocks also sold off and contributed to Friday's weakness. Namely, Boeing (BA) declined on reports that it expects production and delivery delays for its 737 MAX due to parts problems and UNH sold off on investors' concerns about meeting short and long-term EPS targets in the face of Medicare Advantage changes.
In addition, regional banks were weak on Friday despite gains in their larger peers.
Still, the S&P 500 hit its best level since mid-February this week (4,150), reaching the upper bound of an 11-month trading range. Trading this week occurred on noticeably light volume, which could be attributed to larger wait-and-see mindset as investors await the bulk of Q1 earnings season. Participants will be keenly focused on guidance and whether earnings estimates are marked down enough or if they need to come down further.
Only four S&P 500 sectors closed with a loss this week -- real estate (-1.5%), utilities (-1.3%), information technology (-0.4%), and consumer staples (-0.3%) -- while financials (+2.9%) led the outperformers by a decent margin.
The 2-yr Treasury note yield rose 14 basis points this week to 4.10% and the 10-yr note yield rose 12 basis points to 3.52%. The U.S. Dollar Index rose 0.5% to 101.56.
Energy complex futures rose this week. WTI crude oil futures were up 2.5% to $82.55/bbl and natural gas futures rose 4.7% to $2.13/mmbtu.
Nasdaq Composite: +0.3% for the week / +15.8% YTD
S&P 500: +0.8% for the week / +7.8% YTD
S&P Midcap 400: +1.7% for the week / +2.4% YTD
Dow Jones Industrial Average: +1.2% for the week / +2.3% YTD
Russell 2000: +1.5% for the week / +1.1% YTD