Stocks ended the week with losses despite a modest rally on Friday, with the S&P 500 closing higher by 1.11% and the Nasdaq Composite up 1.24%. The S&P dropped by 1% for the week, while the Nasdaq fell 0.8%. Volatility also increased by 23% as a result of stronger than expected jobs numbers and upcoming economic data. Commodities such as gold and oil saw strong rallies as tensions in the Middle East continued to rise.
Individual stocks in the news last week included Tesla, whose shares fell over 6% following disappointing delivery numbers. However, Ark Innovation reportedly added 2.3 million shares of Tesla to its portfolio. Taiwan Semiconductor shares are slightly higher in premarket trading after news that the Biden Administration is set to grant the chip maker $6.6 billion in federal grants. Shares of Boeing are lower after an incident where an engine cover fell off a plane shortly after takeoff.
In merger news, Johnson and Johnson announced a deal to acquire Shockwave Medical for $13.1 billion. Google parent Alphabet is reportedly exploring an acquisition of online marketing software company HubSpot, which has a market valuation of $35 billion. The potential acquisition is likely to face regulatory scrutiny due to the size of the two companies involved.
As we head into the second week of April, markets will be digesting a wealth of new data. Second quarter earnings season begins on Friday, with banks scheduled to kick things off. The economic data thus far has indicated a strong economy, which may disappoint investors hoping for multiple interest rate cuts this year. Expectations for rate cuts have fallen from as many as five to as few as two, reflecting a more positive outlook on the economy.
Looking ahead, the coming week will bring data on Consumer Prices and Producer Prices. The Consumer Price Index (CPI) is expected to show a 0.3% month-over-month increase and a 3.4% year-over-year increase. Core CPI, which excludes volatile food and energy prices, is forecasted to be up 0.3% month-over-month and 3.7% year-over-year. The Producer Price Index is set for release on Thursday. Bond yields are up nearly 1% in premarket trading, reaching the highest levels seen since November.
Overall, the market’s belief that interest rates are unlikely to come down significantly in the near future is placing added emphasis on strong earnings growth to keep the market moving higher. Consensus estimates for second quarter earnings call for growth of 9.4%, with the S&P’s 12-month forward-looking P/E ratio currently above its ten-year average. As investors prepare for the upcoming earnings season and economic data releases, sticking to investing plans and long-term objectives remains key. This content is for educational purposes only and does not constitute trading or investment advice.
