The S&P 500 closed lower, despite ending on a strong note with an assist from Apple (AAPL), as mounting pressure on the banking system and a hawkish Federal Reserve continued to overpower a late-week rally.
Weighed down by downbeat economic data from China and fears that a US recession would choke off demand for fuel, oil prices were down as much as 15% this week, dragging the energy sector 5.8% lower.
The banking sector also limped into Friday’s close. JPMorgan (JPM) acquired First Republic Bank (FRC) this week, but PacWest Bank Corporation (PACW) lost as much as 50% Thursday on reports the bank was exploring strategic options.
Related: The Silicon Valley Bank Collapse: How You Can Protect Yourself
Consumer discretionary, consumer staples and material stocks also were on the defensive, though losses in the consumer discretionary sector were mitigated by strength in cruise operators Carnival (CCL) and Norwegian Cruise Line (NCLH) as shares were buoyed by upbeat Q1 results from Royal Caribbean (RCL).
Facing headwinds from a slower recovery in Asia and elevated inventories, Estee Lauder (EL) cut its fiscal 2023 guidance and suffered its worst daily loss on record, saddling the consumer staple sector with a 0.43% loss.
Technology stocks pulled out ahead with the help from Apple (AAPL) which crushed Wall Street’s earnings expectations. The sector was up 0.6% with chipmakers On Semiconductor (ON), Microchip Technology (MCHP), and Nvidia (NVDA) out in front.
Last week saw the Federal Open Market Committee raise rates for the 10th time in slightly more than a year. Fed chair Jerome Powell signaled a possible pause on further tightenings, but stocks sold off when he said it might be too soon to lower rates. And after Friday’s labor market report showing the economy created another 253,000 jobs in April, the odds for a rate cut as early as July evaporated.
Related: Fed Hikes Interest Rates 0.25%, But Signals Pause in Tightening Cycle
This week’s calendar includes inflation data with the consumer price index on Wednesday and the producer price index Thursday. CPI is forecasted to increase by another 2% to 5% for the nominal, and 0.3% to 0.4% excluding food and fuel. Wholesale prices are likely to be up 0.1% to 0.5%, and up 0.2% to 0.3% for the core.
Another busy week in earnings is expected with Disney (DIS), PayPal (PYPL), Under Armour (UAA) and Airbnb (ABNB), reporting.
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Episode 154 – How to Use a Self-Directed IRA to Invest in Alternative Assets With Mat Sorensen