The S&P 500 index fell 1.1% last week, with the communication services sector leading a broad decline as Q4 earnings continued to come in mixed and rate concerns persisted. It is still up 6.5% for the year-to-date.
The S&P 500 had a strong start to 2023, jumping 6.2% in January, amid hopes for the Federal Reserve’s Federal Open Market Committee to slow its rate increases. However, the index gave back some of those gains in the past week as investors have grown more concerned about how much the FOMC will be able to slow rates, especially after January jobs data released last Friday came in stronger than expected, indicating more aggressive moves may still be needed to fight inflation.
Adding to investors’ concerns, corporate earnings have been coming in mixed, with some companies issuing downbeat guidance while others have warned they are preparing for possible recession.
Communication services had the largest percentage drop, falling 6.6%, followed by a 2.2% slip in consumer discretionary, a 2% decline in real estate and a 1.7% drop in materials. All other sectors also declined, with the exception of energy, which rose 5%.
This week’s earnings reporters will include Coca-Cola (KO), Airbnb (ABNB), Marriott International (MAR), Cisco Systems (CSCO), Applied Materials (AMAT) and Deere (DE).
Economic reports being released next week will be heavy on inflation readings early in the week, with the New York Fed’s latest inflation expectations due on Monday and the January consumer price index on Tuesday.
January retail sales as well as the industrial production index for the month are among the reports expected on Wednesday, followed by the final reading on the January producer price index as well as building permits and housing starts on Thursday. The January import price index and the index of leading economic indicators will round out the week on Friday.
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Bautis Financial 4Q22 Market Commentary