The S&P 500 (SP500) on Friday climbed 2.67% for the week to end at 5,099.96 points, posting gains in four out of five sessions. Its accompanying SPDR S&P 500 ETF Trust (NYSEARCA:SPY) added 2.65% for the week.
O what a difference five trading days and a strong earnings season can bring! Last Friday, the benchmark index delivered its worst weekly performance in over a year while extending its April pullback to more than 5%. Fast forward to today, and not only has the S&P 500 (SP500) snapped a three-week losing streak, it has also posted its best weekly gain since late October 2023.
This week’s gains were primarily driven by a surge in technology stocks and other heavyweight growth sectors such as consumer discretionary and communication services. Favorably received quarterly reports from Tesla (TSLA), Microsoft (MSFT) and Alphabet (GOOG) (GOOGL) anchored the advance, with the latter two cementing their dominance in artificial intelligence (AI) via their performance. Moreover, the Google-parent achieved history on Friday by closing above $2T in market cap valuation.
Other household names and major companies giving markets a bump this week with their earnings included:
GE Aerospace (GE) raised its annual profit guidance in its first results since the final breakup of the former industrial conglomerate General Electric; legacy automaker General Motors (GM) smashed revenue estimates by over a billion dollars; and Boeing (BA) delivered a better-than-feared quarterly loss amid an ongoing production cap on its best-selling jet and heavy regulatory scrutiny.
Despite earnings lifting Wall Street this week, market participants also received a reality check in the form of economic data that significantly clouded the outlook for the Federal Reserve’s future monetary policy actions.
On Thursday, the first estimate of U.S. Q1 GDP growth came in much lower than anticipated while the core personal consumption expenditures (PCE) price index – the Fed’s preferred price gauge – ticked up more than expected. The combination of decelerating growth and sticky inflation sparked widespread reactions from analysts that said the report pointed to stagflation. Independent Advisor Alliance’s Chris Zaccarelli called the print the “worst of both worlds.”
Following the GDP stunner, traders were fearing for the worst on Friday ahead of the March core PCE price index reading. But the Fed’s favorite inflation measure came largely in-line with estimates and helped calm things a bit. Still, markets have now dialed back their expectations of interest rate cuts by a notable amount since the start of the year.
All eyes are now on next week’s Fed monetary policy decision and chair Jerome Powell’s press conference to glean clues about future monetary policy actions.
“Stalling in the disinflation process will be front and center as the FOMC meets next week. Over the past few meetings the Committee has indicated that while it intends to lower the funds rate it wanted to first see more signs of easing in inflation pressures to gain confidence that inflation is headed back to two percent,” JPMorgan’s Michael Feroli said.
“Last week, Chair Powell indicated that-unsurprisingly-the 1Q inflation data hadn’t engendered that confidence. Because of this, policy easing would come later than previously was anticipated. We expect this message to repeated next week, with the Committee intending to keep policy in its current restrictive stance for as long as it takes to gain that confidence,” Feroli added.
Turning to the weekly performance of the S&P 500 (SP500) sectors, all 11 ended in the green. Technology led the way with an outsized +5% gain, while Consumer Discretionary and Communication Services rounded out the top three. Materials rose the least. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from April 19 close to April 26 close:
#1: Information Technology +5.11%, and the Technology Select Sector SPDR Fund ETF (XLK) +3.79%.
#2: Consumer Discretionary +3.50%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +3.62%.
#3: Communication Services +2.72%, and the Communication Services Select Sector SPDR Fund (XLC) +0.81%.
#4: Industrials +1.82%, and the Industrial Select Sector SPDR Fund ETF (XLI) +1.82%.
#5: Real Estate +1.60%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) +1.62%.
#6: Consumer Staples +1.54%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +1.54%.
#7: Utilities +1.17%, and the Utilities Select Sector SPDR Fund ETF (XLU) +1.16%.
#8: Financials +1.05%, and the Financial Select Sector SPDR Fund ETF (XLF) +1.09%.
#9: Health Care +0.75%, and the Health Care Select Sector SPDR Fund ETF (XLV) +0.73%.
#10: Energy +0.74%, and the Energy Select Sector SPDR Fund ETF (XLE) +0.81%.
#11: Materials +0.65%, and the Materials Select Sector SPDR Fund ETF (XLB) +0.63%.
For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.
