Debt Debate

Stock indices finished a choppy week mixed as the market looks for direction amid a mixed bag of bullish and bearish catalysts as earnings reports wind down.  The Nasdaq hit its highest level since August of 2022 thanks to the tech sector’s post-earnings strength. However, other cyclical sectors showed notable weakness amid lingering global growth fears.  The Consumer Price Index (CPI) dropped below 5% in April, while the Producer Price Index (PPI) also came in below the consensus estimate.

S&P 500 Performance

The S&P500 index closed -0.3% last week. The market index ended at 4,136. The index is now up +7.4% for the year to date.  All but two sectors fell last week. The energy and materials sectors had the largest percentage drops for the week, dropping -2.2% and -2%, respectively. Other sectors down by more than -1% each included financials, health careand industrials. Only two sectors rose on the week , communication services climbed +4.3% and consumer discretionary rose +0.6%.

The energy sector’s drop came as crude oil futures fell again. Occidental Petroleum (OXY), fell -4.3% on the week as the company reported Q1 adjusted earnings per share below analysts’ mean estimate and Warren Buffett express no desire to take over the whole company.  Consumer staples had the smallest percentage decline last week. Chicken prices have cratered and the -20% tumble in the shares of Tyson Foods (TSN) marked the stock’s worst weekly performance since November 2008. Restaurant company Wingstop (WING), lower chicken prices beneficiary, hit a new all-time high.

Gains in communication stocks were led by shares of Google (GOOGL, GOOG), which rose +11% amid the company’s annual development conference. At the event, Google said its Google Search volume has been uninterrupted by artificial-intelligence rivals.

Earnings season continues to wind down however a few large and important names report this week. Companies expected to release quarterly earnings results include Home Depot (HD), Cisco Systems (CSCO), Target Corp. (TGT), Walmart (WMT), Alibaba Group Holding (BABA) and Deere (DE).

 

US Debt Ceiling

The clock on US debt ceiling negotiations is ticking. President Biden and congressional leaders will meet again Tuesday. Over the weekend, Lael Brainard said that talks were continuing in a constructive manner, while Treasury Secretary Yellen said leaders “have found some areas of agreement”.  There are 4 Fed speakers today and many more in the week ahead, including Chair Powell this Friday. These debt ceiling wows and deadline is causing wild gyrations in uber short term Treasury bill markets as money market mutual funds are loathe to be in position to “break the buck”.

While the Federal Reserve met 2 weeks ago and signaled that it would pause its rate hiking cycle in June, the parade of Fed officials continues on the financial channels parroting still too high inflation.  Credit tightening from the regional bank collapses is helping to stop the monetary tightening cycle sooner than most economists expected.  However, the Fed seems to want to regain its reputation versus guiding the economy on a soft landing.

The OHFG YouTube channel is currently undergoing some placement modifications.  For now, “Stock Talk” can be found by clicking on this link and subscribing to its own content. https://www.youtube.com/@OakHarvestStockTalk.  Alternatively, you can type “Stock Talk with Chris” in the You Tube search box, and you should be directed to the new content.  The investment content will be a “sub-channel” under our current OHFG channel.  Please subscribe if you are interested.

Oak Harvest Weekly Stock Talk: Watching too much Financial News? Watch by clicking here.