Week of April 24, 2023

The volatility of the market over the past couple of months continued last week. Friday saw the Dow end 0.07% down, while the S&P 500 and Nasdaq rose 0.09% and 0.11%, respectively. For the week, all three major indices ended in the red with the Dow ending a four-week win streak to close 0.23% down. The S&P fell 0.1% while the tech-heavy Nasdaq saw the largest decline of the three, dropping 0.42%.

“There’s the continued push-pull of the fact that the economy has been a lot more resilient than many people expected and corporate earnings have held up pretty well, all things considered,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

Investors are solely focused on the Federal Reserve’s (Fed) upcoming meeting scheduled for May 2-3. It is widely expected that they will raise interest rates one more time before pausing interest rate increases. According to the CME FedWatch Tool, there is an 89.1% probability that another 25-basis point increase will be announced on May 3rd.

Earnings season is in full swing and has underwhelmed overall. As of Friday (4/21), 76% of S&P 500 companies who have reported earnings have beaten EPS estimates, according to FactSet. Although companies have broadly beat expectations this past week, overall profit reports failed to boost stocks, with some investors fearing an earnings drop with a likely recession ahead. “So far, earnings season is off to an uneventful start, with many companies meeting already reduced earnings expectations and that helps to explain the lack of movement in the major stock indices over the past few days,” said Carol Schleif, chief investment officer at BMO Family Office. She added that she expects stocks to trade in a tight range for some time.