The S&P 500, Dow Jones Industrial Average, and Nasdaq all closed the last week of April with gains while the Russell 2000 logged a sizable decline.
Investors received a huge slate of earnings news and economic data this week, which all reflected mixed activity. Those mixed results fueled a midweek sell-off before a strong rally effort during the last two sessions saw the market pick itself back up.
Earnings results from many mega cap stocks pulled a lot of focus this week. Namely, Alphabet, Microsoft, Meta Platforms, and Amazon.com all reported quarterly results. Unsurprisingly, their reports received mixed reactions from investors.
Alphabet and Amazon declined on their earnings reports, with the latter warning about slowing cloud services growth, while Microsoft and Meta Platforms rose sharply. Nonetheless, mega cap stocks a class made an outsized contribution to index level gains. The US Mega Cap Growth Index rose 1.9% on the week.
The continued outperformance of the mega caps helped foster a sense of relief that those names are still performing relatively well from an operational standpoint and maintaining their position as market leaders.
On the flip side, some earnings reports piled onto investors' lingering growth concerns. Most notably, UPS, Dow component Dow Inc., Texas Instruments, and Norfolk Southern all disappointed with their earnings and/or guidance.
Ongoing fallout at First Republic Bank following its disappointing earnings report, which featured a 40% decline in deposits, renewed lingering worries about banks facing higher deposit costs and tighter lending standards, potentially impeding on economic growth prospects. Notably, the market bounced back quickly from a sharp decline after CNBC reported that FRC is likely headed to receivership, indicating that issues at FRC are not viewed as systemic.
Economic data this week showed signs of weakness, yet there was no clear signal that the economy is deteriorating rapidly. The advance Q1 GDP report didn't look great on the surface with real GDP increasing at an annualized rate of 1.1% (Briefing.com consensus 2.0%) after increasing 2.6% in the fourth quarter. However, personal consumption expenditure growth accelerated in the first quarter to 3.7% from 1.0% in the fourth quarter.
The March Durable Orders report contributed to slowdown concerns due to a 0.4% decline in nondefense capital goods orders in March -- a proxy for business spending. Separately, the labor market remains strong as evidenced by the initial jobless claims remaining a long way from the levels that have been seen in past recessions since 1980.
The S&P 500 communication services sector (+3.8%) was the top gainer this week by a big margin, followed by information technology (+2.4%) and real estate (+1.5%). The utilities (-1.0%) and industrials (-0.6%) sectors logged the biggest declines.
Treasuries logged gains across the curve this week. The 2-yr note yield fell 10 basis points to 4.06% and the 10-yr note yield fell 12 basis points to 3.45%. The U.S. Dollar Index closed the week flattish at 101.68.
· Nasdaq Composite: +1.3% for the week / +16.8% YTD
· S&P 500: +0.9% for the week / +8.6% YTD
· Dow Jones Industrial Average: +0.9% for the week / +2.9% YTD
· S&P Midcap 400: -0.3% for the week / +2.5% YTD
· Russell 2000: -1.3% for the week / +0.4% YTD