On Thursday, the stock market experienced a rare turnaround, with stocks initially rising by 1% before closing with losses of over 1%. This type of turnaround only occurs about 10% of the time according to data compiled at tastylive. The S&P 500 fell 1.23%, and all eleven sectors closed lower, while the Nasdaq Composite dropped 1.4%. The impact of the Thursday market shift on Friday’s performance remains uncertain.
The March employment report was released, exceeding expectations with 303 thousand new jobs created and an unemployment rate of 3.8%. This positive news pushed interest rates higher, with the benchmark 10-year now yielding 4.37%. The gains in jobs were primarily seen in the leisure and hospitality, government, and education/healthcare sectors. Equities initially sold off following the report but quickly regained ground, while bonds fell.
The significant drop in the market on Thursday saw both the S&P 500 and Nasdaq close below their 21-day moving averages, signaling a break in support in what has been a strong market. The increased volatility was evident with the VIX closing at 16.35. The morning started with initial jobless claims higher than expected, seen as positive for those hoping for Fed interest rate cuts. However, comments from Federal Reserve members cast doubt on the possibility of rate cuts this year.
Israel’s warning of potential retaliatory strikes following an attack on an Iranian diplomatic facility in Damascus heightened tensions in the Middle East, sending oil prices higher. Oil closed up 1.45% at $90.65, the highest level since October of last year. Concerns about escalating violence in the region added to market volatility. Looking ahead to next week, earnings season begins with banks, and estimates for first-quarter growth are significantly higher, putting stock prices at risk if expectations are not met.
The market has been driven by a group of key stocks known as the Magnificent Seven, but weakness in some companies has raised concerns. Apple, for example, has seen a 12% decline in its stock this year and recently laid off employees working on its electric car project. The market will need to see if these stocks can regain their leadership positions. The debate in the market is between those calling for interest rate cuts and those focusing on strong earnings and economic growth.
As attention shifts to upcoming economic data and earnings reports, including the Consumer Price Index (CPI) and Producer Price Index (PPI), volatility is expected to persist in the market. A combination of profit-taking, risk-off behavior, and anticipation of new data may lead to choppy trading in the coming week. Investors are advised to stick to their long-term investment plans and objectives amidst the market fluctuations. The current market conditions highlight the importance of monitoring both macroeconomic indicators and corporate earnings for future market performance.
