Market Drops – Earnings Season Ramps Up – Monday Morning Market Memo – April 25, 2022

Market Drops – Earnings Season Ramps Up – Monday Morning Market Memo – April 25, 2022

The major stock market averages posted a notable decline last Friday, with the Dow Jones Industrial Average shedding nearly 1,000 points (or 2.8%).  For last week in total, the Dow fell 1.9% (its fourth consecutive weekly decline), while the Standard & Poor’s 500 Index dropped 2.8% and the tech-heavy NASDAQ Composite tumbled 3.8% (their third consecutive weekly decline).

Sentiment turned sour last week after hawkish comments from Federal Reserve Chairman Jerome Powell, who said fighting inflation is “absolutely essential”.  Investors continue to grapple with rising interest rates and a more aggressive central bank.  According to the CME FedWatch Tool – the probabilities of a ½ point rate hike at next month’s meeting has now increased to 97.1 percent.

Also on the mind of the market currently, is the health and outlook for corporate earnings.  Earnings season really ramps up in the week ahead, in its busiest week, with about 1/3 of S&P 500 companies scheduled to report results.  Blue chip names reporting include Coca-Cola3M, VisaKraft HeinzCaterpillarMcDonald’sMerckColgate-Palmolive, and Chevron.  All eyes will be on big tech in what can be sector/market moving reports – with Amazon.comAppleMicrosoft, Meta (Facebook) and Alphabet all highlighting the week in earnings.

Looking at how results have come in so far: For the first quarter of 2022, with 20% of S&P 500 companies reporting actual results, 79% have reported a positive EPS (Earnings Per Share) surprise, which is above the 5-year average, and 69% have reported a positive revenue surprise, which is equal to the 5-year average – according to data from FactSet.

In summary, get ready for a week where financial markets will be intently focused on interest rates and earnings.  Keep in mind, long term investing includes ups and downs in both interest rates and earnings.  Remember investing is a marathon, not a sprint – and we believe in time-in the market, not timing the market!

All the best – Southport Station Financial Management, LLC