The S&P 500 index fell 2.1% last week as investors digested the highest consumer inflation figure in four decades as well as a mixed start to the Q1 earnings season.
Despite being short, the week had multiple key updates on the state of the US economy, including inflation data for March and the kickoff of Q1 corporate earnings reports.
The US consumer price index rose by a seasonally adjusted 1.2% in March, matching expectations, and the core consumer price index, which excludes food and energy prices, rose by 0.3%, which was better than the consensus estimate for a 0.5% increase. Still, the year-over-year rates for overall and core CPI jumped to 8.5% and 6.5%, respectively, from decades-high levels of 7.9% and 6.4% in the previous month.
The US producer price index for March, meanwhile, rose by 1.4%, which was higher than the 1.1% gain expected. The core PPI figure, which excludes food and energy prices, also came in worse than expected at a rate of 0.9%, versus a 0.5% increase expected. Year over year, the PPI climbed 11.2% – marking the largest gain since records began in 2010 – while core PPI rose by 7%.
On the earnings front, JPMorgan Chase (JPM) reported lower-than-expected Q1 earnings per share despite revenue coming in slightly above expectations while Delta Air Lines (DAL) posted a Q1 loss but said it anticipates a Q2 profit.
By sector, technology and communication services had the largest percentage drops of the week, down by 3.8% and 3%, respectively. They were followed by a 2.9% decline in health care and a 2.6% slip in financials. Other sectors in the red included real estate, utilities and consumer discretionary.
Four sectors managed to still post gains last week: Materials rose 0.7%, followed by a 0.4% lift in industrials, a 0.3% rise in energy and a 0.2% increase in consumer staples.
In communication services, Twitter (TWTR) shares ended the week 2.5% lower as the microblogging company confirmed the receipt of an unsolicited, non-binding proposal from Elon Musk — who already has a stake of more than 9% in Twitter — to acquire all of its outstanding common stock for $54.20 per share in cash. Twitter said its board will carefully review the proposal, but a Wall Street Journal report citing a person familiar with the situation said Twitter is also weighing a so-called poison pill, a legal mechanism that would prevent Musk from increasing his stake in the company significantly.
This week, the companies expected to release quarterly earnings include Bank of America (BAC), Charles Schwab (SCHW), Hasbro (HAS), Johnson & Johnson (JNJ), Netflix (NFLX), Procter & Gamble (PG), Alcoa (AA), AT&T (T) and Verizon Communications (VZ).
Economic data will be on the lighter side but with an emphasis on housing data, including March building permits, housing starts and existing home sales.
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