The S&P 500 index rose 0.8% last week, its first week of the year in the black, as better-than-expected Q1 results from Apple (AAPL) gave the market a boost at a time when worries have been high over the ongoing pandemic, inflationary pressures and potential monetary policy changes.
Last week’s market activity came as numerous quarterly earnings reports were released by US companies, with many noting their results were negatively impacted by rising input costs and supply chain issues amid the COVID-19 pandemic. These challenges have also weighed on many companies’ outlooks for 2022.
However, Apple’s late-Thursday report showed the consumer technology company was able to produce record sales in its fiscal Q1 ended in December. Its revenue and earnings per share both rose year over year and topped analysts’ expectations. Apple also said it expects to achieve “solid” year-over-year revenue growth in the quarter ending in March despite “significant” supply constraints.
In other encouraging news last week, government data showed US economic growth, measured by gross domestic product, rose 6.9% in Q4, surpassing an Econoday consensus estimate of 5.7% growth and following a 2.3% rise in Q3.
Meanwhile, investors are digesting comments from a Federal Open Market Committee meeting that indicated an increase in interest rates could come at its mid-March meeting. Investors are concerned about the potential impact on the economy and the labor market, especially as the US is still grappling with the COVID-19 Omicron variant, but Fed Chair Jerome Powell said “there’s room to raise interest rates without threatening the labor market.”
Powell also said the FOMC does expect some softening in the economy from the COVID-19 Omicron variant, but expects that will be temporary.
The S&P 500’s biggest percentage gainer of the week was energy, which jumped 5% amid a climb in crude oil futures to seven-year highs as the threat of war in Eastern Europe continues to raise security of supply concerns. Technology had the next-largest percentage climb, up 2.3%, followed by gains in financials, health care and communication services.
However, a number of other sectors were still in the red for the week, led by a 1.5% slide in industrials, a 1.3% slip in utilities and a 1% decline in consumer discretionary. Other decliners included materials, consumer staples and real estate.
Next week’s companies releasing quarterly results are expected to include Google parent Alphabet (GOOGL) as well as Exxon Mobil (XOM), General Motors (GM), Starbucks (SBUX), D.R. Horton (DHI), Amazon.com (AMZN), Merck (MRK), Eli Lilly (LLY) and Ford Motor (F).
In economic data next week, all eyes will be on the January employment data, with ADP set to release monthly private-sector jobs data on Wednesday while the Labor Department will release weekly jobless claims on Thursday and monthly nonfarm payrolls as well as the monthly unemployment rate on Friday. Other economic reports expected next week will include readings on the manufacturing and services sectors from the Institute for Supply Management as well as Markit.
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