Tech Retreat – Busy Week Ahead -Monday Morning Market Memo – April 22, 2024

Tech Retreat – Busy Week Ahead -Monday Morning Market Memo – April 22, 2024

The tech-heavy NASDAQ Composite lost 2% Friday, falling for its sixth consecutive session.  For the week, the NASDAQ tumbled a whopping 5.5% to 15,282.  The Standard & Poor’s 500 Index shed 3% to 4,967, posting its third straight down week and now trading below the psychologically notable 5,000 mark.  The Dow Jones Industrial Average stood out last week, with strong relative outperformance, finishing essentially unchanged at 37,986.

Reasons behind the overall market decline include worries over sticky inflation (meaning a likely delay of Federal Reserve interest rate cuts), geopolitical tensions, and general profit-taking after the Bull had a nice run earlier this year.  Further, earnings reports have had a mixed feel/reaction so far.  The highlight of the earnings show last week was Netflix, but viewers did not like watching the stock price.  Despite easily topping estimates on both the top and bottom lines, Netflix shares dropped over 9% after the company said it will no longer announce subscriber numbers starting in 2025.

We enter the heart of earnings season this week.  Big tech will attract the most attention, with Meta PlatformsAlphabetTesla, and Microsoft all scheduled to report.  Other companies set to report include VerizonFord MotorGeneral MotorsJetBlue AirwaysPepsiCoRTXUnited Parcel ServicesVisaAT&TGeneral DynamicsInternational Business MachinesBoeingBristol-Myers SquibbCaterpillarIntelMerckChevron, and Exxon Mobil.

Looking at overall expectations for this earnings season: For the first quarter of 2024, the blended year-over-year earnings growth rate for the Standard & Poor’s 500 Index is .5%, which if that is the actual growth rate, it would mark the third-straight quarter of year-over-year earnings growth for the index – according to FactSet.

Also in the spotlight this week, is Friday’s release of the monthly Personal Consumption Expenditures Price Index, which is the Federal Reserve’s preferred inflation gauge and highly important in determining monetary policy.  Market forecasts are for a 2.6% year-over-year increase in March, up a notch from February’s reading.  The Federal Open Market Committee meets next week, and it is near certain they will leave rates unchanged.  Currently, with inflation still above the target range, probabilities are the Fed will not cut interest rates until the second half of the year.

We’ll also be tracking the initial read on first quarter Gross Domestic Product (economic growth) by the Bureau of Economic Analysis on Thursday.  Expectations here are the economy grew about 2.7% last quarter.  This forecast has been edging up the last several weeks, which also adds to market belief the Fed can wait longer until it cuts interest rates.  It’s going to be a busy week!

As always, don’t hesitate to contact us with any questions or if you would like to schedule a meeting.

All the best – Southport Station Financial Management, LLC