Earnings Parade
Equities and the S&P 500 ended the week mostly lower as many value sectors gained traction for the second straight week on the back of economic growth concerns.
Consumer staples and real estate led the S&P 500 Index. Communication services, the best returning sector year to date, was last week’s leader to the downside. Tech stocks were pressured by Tesla, which dropped –11.77% after indicating further price cuts were. Energy, as it has most of 2023, lagged the S&P 500 Index as West Texas Intermediate crude oil fell by over -5.6%. Financial stocks moved higher for the second straight week with JPM’s reassuring money center bank earnings.
The S&P 500 fell -.1% last week with the cash S&P 500 ending Friday at 4133.2, down a few points from the prior Fridays close at 4137. The index is still positive for the month and year to date; it is now up 0.6% for April and up 7.7% for 2023. The comm services sector had the largest decline down -3.1% (AT&T -8.6%), followed by a -2.5% decline in energy(Valero Energy -9.3%). Technology, materials and health care were also in the red.
Staples cleaned up last week to the upside, gaining +1.7% (Clorox +4.4%), followed by a 1.6% rise in real estate (Prologis +3.2%) and a 1.1% increase in utilities. Financials, consumer discretionary and industrials also rose.
Last week’s increase came as 1Q23 earnings from banks including JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) surpassed analysts’ estimates (which had been cut into the reports) on Friday.
With about 20% of S&P 500 companies having reported, the latest data from Refinitive has S&P 500 earnings expected to fall -5% y/y in the first quarter of 2023. This would make it the second consecutive quarter down YTY earnings level. Earnings so far have been decent, with just under 70% of companies topping reduced analyst expectations. Much to the chagrin of market pundits, volatility continues to trend down not up. The spot VIX index dropped below 17 for the first time in 15 months.
Concerns over banking stress continue to fade. The Federal Reserve remains on track to raise rates another 25 basis points next week. Into that meeting, there will be no Fed governor speeches as they are “blacked out” from public comments. Thankfully. Some key economic releases this week that could move the needle for a June interest rate move include the Fed’s preferred measure of underlying inflation, core PCE prices; its favorite measure of wages, the employment cost index; and the best measure of economic performance, real GDP.
Tax Day receipts to the Federal government were less than expected. This means the Federal government is facing a sooner-than-expected default deadline. This puts more pressure on Washington D.C and the White House to figure out a debt ceiling deal. In January, Treasury Secretary Janet Yellen said the federal government can pay its bills only through early June without an increase in the debt ceiling limit.
This week’s (the busiest week of the season) earnings calendar includes Coca-Cola (KO), General Electric (GE), McDonalds (MCD), Pepsi (PEP), Microsoft (MSFT), Texas Instruments (TXN), Boeing (BA), Facebook (META), Caterpillar (CAT), Exxon (XOM), and Amazon (AMZN). 170 S&P 500 companies report this week, so we have not listed them all.
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4/21/2023: Stock Talk – Bears Beware, Bad Breadth? – Not so Fast, “Zweig Breadth Thrust“ indicator Triggered on 3/31/2023, Historically Rare and Positive
https://www.youtube.com/watch?v=MbqnxfoYR-Q
Interesting Reads:
Year to Date Sector Returns:
