Stocks remained resilient last week amid mixed earnings reports, hawkish Fed-speak, and lingering recession fears, closing out the five trading days with small losses. The Dow Jones Industrial Average slipped 0.23%, while the Standard & Poor’s 500 lost 0.10%. The Nasdaq Composite index fell 0.42% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.10%.1,2,3
Stocks traded most of last week around the flatline as investors grappled with several headwinds. The first was disappointing earnings results, coupled with the absence of earnings guidance from some companies due to an uncertain economic climate. Weak economic data, including declines in housing and leading economic indicators, also weighed on investor sentiment. Finally, multiple Fed officials spoke last week, signaling that inflation remained too high and that further rate hikes may be likely.
Underneath the seemingly placid surface of the major market indices, there was substantial price action at the individual stock and sector level. Poor earnings results hit communication services stocks and regional banks, while margin pressures put pressure on auto stock valuations.
Two housing reports reflected ongoing fragility in the housing market and fed prevailing economic slowdown worries. Sales of new homes fell 0.8% in March, dragged down by a 5.2% slide in new multi-family home construction. Sales of single-family homes were a bright spot, rising 2.7% to a three-month high, though that hopeful note was tempered by an 8.8% drop in new application permits–an indicator of future new home building.4
Existing home sales also suffered a month-over-month decline in March, falling 2.4%. Sales plummeted 22% from March 2022 levels as higher mortgage rates and tight inventories impacted affordability.5
1. The Wall Street Journal, April 21, 2023, 2. The Wall Street Journal, April 21, 2023, 3. The Wall Street Journal, April 21, 2023, 4. Yahoo Finance, April 18, 2023, 5. CNBC, April 20, 2023