The S&P 500 index fell 1.6% last week, ending on a negative note as the third quarter bank earnings added to investors’ concerns about the state of the economy.
This wipes out last week’s 1.5% gain. The S&P 500 is now down 0.1% for the month of October to date and down 25% for the year to date.
The week’s decline came as the S&P 500 fell 2.4% Friday after Q3 earnings reports from banks including JPMorgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC) showed mortgage lending has been falling amid climbing interest rates. The reports also showed banks have been setting aside more money to cover future potential loan losses while consumers have been relying more on their credit cards.
The concerns raised by the bank reports came even as quarterly earnings by consumer staples companies including Walgreens Boots Alliance (WBA) and PepsiCo (PEP) were better than feared. Investors are watching this quarter’s earnings reports closely to see how inflation and the higher rate environment are impacting consumers and companies.
Underscoring the inflationary conditions, the Labor Department last week reported its core consumer price index was up 6.6% in September from a year earlier, marking a fresh 40-year high.
The consumer discretionary sector had the largest percentage drop of the week, down 4.1%, followed by a 3.2% slide in technology, a 2.6% decline in utilities and a 2.4% drop in real estate. Other decliners included materials, communication services, energy and industrials.
Three sectors still rose week over week, led by consumer staples, up 1.4%. The other gainers were health care, up 0.8%, and financials, up 0.2%.
This week’s earnings calendar features companies such as Bank of America (BAC), Charles Schwab (SCHW), Johnson & Johnson (JNJ), Lockheed Martin (LMT), Tesla (TSLA), Procter & Gamble (PG), Abbott Laboratories (ABT), Danaher (DHR), Union Pacific (UNP), AT&T (T) and Verizon Communications (VZ).
Economic reports will be heavy on housing data including September building permits, housing starts and existing home sales. The September industrial production index and capacity utilization rate, as well as October manufacturing activity readings from the New York and Philadelphia regions, will also be released.
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