The S&P 500 index slipped 0.1% last week despite many companies posting Q1 earnings beats, as some weaker-than-expected guidance and executives’ warnings of expected challenges weighed on investor sentiment.
However, the index is still in positive territory for the month and year to date; it is now up 0.6% for April and up 7.7% for 2023.
The slight decline came as Q1 corporate earnings results for many companies have been coming in above analysts’ mean estimates, but some guidance has been lackluster and executives have been signaling they are preparing for challenges ahead that could include a recession.
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The downbeat commentary and guidance are being seen by investors as signs that inflation as well as the Federal Reserve’s rate increases to tamp down on inflation are weighing on the economy. While investors are hoping the rate increases will help slow down inflation, they are fearful of slowdowns elsewhere in the economy.
The communication services sector had the largest percentage drop this week, down 3.1%, followed by a 2.5% decline in energy. Technology, materials and health care were also in the red.
However, consumer staples led to the upside, climbing 1.7%, followed by a 1.6% rise in real estate and a 1.1% increase in utilities. Financials, consumer discretionary and industrials also rose.
This week, earnings reports are expected from companies such as Coca-Cola, Microsoft, Google, Visa, Pepsico, McDonalds, Facebook, Thermo Fisher Scientific, Boeing, Amazon.com, Mastercard, Eli Lilly, Merck, Exxon Mobil and Chevron.
Economic data will include reports such as March new home sales on Tuesday and March durable goods orders on Wednesday, but investors are likely to be most focused on Thursday’s report of Q1 gross domestic product as well as Friday’s release of the March personal consumption expenditure price index, a key inflation measure.
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Episode 152 – What to Consider When Reviewing Your Investments