QVML - The S&P 500 Drifts Slightly Lower As Recession Fears Rise

2023-04-24 12:47:00 ET

Summary

• Rising fears of recession did little to alter the trajectory of the S&P 500 (SPX) during the third week of April 2023. The index ended the week at 4133.52, down just 0.1% from where it closed the previous week.
• Earlier in the week, signs that China's efforts to stimulate its economy were finally gaining traction buoyed the U.S. stock market.
• The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 held steady at +2.5% over the past week.

Rising fears of recession did little to alter the trajectory of the S&P 500 ( SPX ) during the third week of April 2023. The index ended the week at 4133.52 , down just 0.1% from where it closed the previous week.

It didn't start off that way. Earlier in the week, signs that China's efforts to stimulate its economy were finally gaining traction buoyed the U.S. stock market. But by week's end, investors returned their focus to the domestic situation in the U.S. economy, with the net effect of leaving the S&P 500 index just slightly lower.

That action, or lack thereof, can be seen in the latest update to the alternative futures chart. We find the level of the S&P 500 is just a bit below the midpoint of the redzone forecast range we added for last week's update .

Our reading of why stock prices behaved as they did in the week that was is drawn directly from the week's market-moving headlines. Here's our summary of the new information investors had to absorb during the past week:

Monday, 17 April 2023

• Signs and portents for the U.S. economy:
  • Oil drops 2% on higher dollar, interest rate concerns
    • Exclusive-G7 coalition to keep Russian oil price cap at $60 per barrel -source
  • Tighter lending seen bringing mild recession later this year-Vanguard
• Bigger stimulus still developing in China:
  • China central bank boosts liquidity support with roll over of medium-term loans
• Eurozone government minions, ECB minions claim they're worried about inflation:
  • Inflation is a tough beast says German finance minister
  • ECB can review inflation goal once it's achieved, Lagarde says
• Wall St ends higher; investors await earnings, Fed cues
  • Consumer stocks' earnings may offer clues on U.S. economy's resilience
    • State Street profit misses on lower fee income; shares fall
    • M&T Bank Corp beats profit estimates as interest income doubles

Tuesday, 18 April 2023

• Signs and portents for the U.S. economy:
  • Oil prices edge higher on falling US inventories, China data
• Some Fed minions looking for bigger rate hikes:
  • Three Fed bank boards wanted bigger rate hike in March
• More signs of economic recovery developing in China:
  • China's economy gathers speed, global risks raise challenges to outlook
    • Instant View: China's economy grew 4.5% year-on-year in Q1, above expectations
    • China's March industrial output rises 3.9%; retail sales up 10.6%
• BOJ minions pledge they'll keep never-ending stimulus alive:
  • BOJ aims to meet 2% inflation goal by keeping easy policy - Ueda
• ECB minions willing to leave size of rate hike to chance:
  • ECB's Lane backs May rate hike with size depending on data
• S&P 500 ekes out gain as tech supports, J&J, Goldman disappoint
  • Goldman Sachs profit falls on sluggish deals and bond trading, Marcus loss
    • Goldman has its fingers in the wrong pies
  • J&J issues cautious 2023 forecast, shares fall

Wednesday, 19 April 2023

• Signs and portents for the U.S. economy:
  • More US consumers are falling behind on payments
  • Oil falls 2% as dollar gains on potential Fed rate hike
• Fed minions see economy plodding along:
  • US economic activity little changed, Fed report shows
• Bigger trouble developing in Japan:
  • Big Japanese manufacturers remain gloomy as external demand ebbs - survey
• Bigger stimulus developing in China:
  • China says drafting plans to boost recovery, expansion of consumption
  • China may hold lending benchmarks steady as recovery remains on track -analysts
  • Analysis: China's 'atypical' deflation cycle gives central bank a headache
• ECB minions worried about inflation have more inflation, credit squeeze to deal with:
  • Core euro zone inflation edges up in March, keeping ECB on alert
  • Euro zone services booming but sentiment recovery may have stalled -ECB's Lane
  • Credit squeeze 'biggest threat' to economic outlook, Fidelity says
• Dow dips, S&P 500 stable after medtech gains, Netflix drag
  • Morgan Stanley profit beats as wealth business cushions deals slump
  • Netflix shares slip; five charts that break down its earnings
  • Abbott beats profit estimates on strong medical device sales

Thursday, 20 April 2023

• Signs and portents for the U.S. economy:
  • US existing home sales resume downward trend in March
  • US labor market cooling; leading indicator flashes recession
  • Oil falls 2% on recession fears, swelling US fuel stocks
• Fed minions looking for one more rate hike:
  • Fed's Mester sees policy rate over 5% and 'soft landing' on horizon
• China central bank minions claim they're not worried about deflation:
  • China's central bank official dismisses long-term deflation scenario
• BOJ minions think all is economically well in 7 of 9 regions of Japan, thinking about changing up never-ending stimulus sometime later:
  • BOJ keeps upbeat economic view on seven of Japan's nine regions
    • Japan March export growth slows, annual trade deficit widens to record
  • BOJ open to tweaking yield-control policy this year if wage momentum holds
• ECB minions want more rate hikes before stopping, don't trust inflation is over in Eurozone:
  • ECB's Lagarde: "still a bit of a way to go" on monetary policy
    • ECB's Knot 'not uncomfortable' with terminal rate market expectations
  • Some ECB governors doubted 'immaculate disinflation' in March
• Wall St slides after gloomy earnings led by Tesla
  • Tesla tumbles as investors balk at Musk's price-cutting spree
    • ANALYSIS-Elon Musk pins hopes on full self-driving as Tesla's next profit driver
  • US regional banks' shares slip as deposit flight counters higher interest income

Friday, 21 April 2023

• Signs and portents for the U.S. economy:
  • U.S., Euro zone business activity accelerates to 11-month highs in April
  • US bank deposits, loans ticked down in latest week -Fed data
• Fed minions looking forward to one more rate hike, blame loophole for their missing signs of Silicon Valley Bank ( SIVBQ ) failure, not so sure of their next steps:
  • Fed tilts toward rate hike, with a possible pause in view as lending slows
    • Fed's Harker sees more central bank action to quash inflation pressures
  • U.S. Fed works on loophole that masked losses on SVB's securities -WSJ
    • U.S. Fed may reverse rules that masked losses on SVB's securities - WSJ
  • Fed's Cook sees a less certain outlook for future of monetary policy
• Bigger stimulus developing in China:
  • China passes guidance for supporting private sector - state media
• BOJ minions see less economic shrinkage, broadening inflation, not going to change never-ending stimulus, say all's good with financial system:
  • Japan's factory activity shrinks at slowest pace in six months - PMI
  • Japan's broadening inflationary pressures test BOJ's dovish stance
  • BOJ likely to maintain ultra-low rates, dovish guidance next week -sources
    • BOJ unlikely to move in April, most economists say: Reuters poll
  • BOJ sees 'sound and resilient' financial system despite some jitters
• ECB minions thinking about keeping rate hikes going:
  • ECB must guard against early exit from restrictive policy -Rehn
• Wall St posts slim gain ahead of big earnings week

Monday, 24 April 2023

• Late breaking bonus headline!
  • Analysis-China rebound buoys hopes for stronger-than-expected US, Europe earnings
    • This analysis follows up the factors we observed boosting U.S. stock prices in the earlier part of the preceding week. Given its focus, we thought it made sense to add it to this week's roundup of market-moving headlines as a late breaking bonus headline.

The CME Group's FedWatch Tool anticipates the Fed will hike the Federal Funds Rate by a quarter-point to a target range of 5.00-5.25% at its upcoming meeting on 3 May (2023-Q2). After that, the FedWatch tool anticipates a series of quarter-point rate cuts starting from 1 November (2023-Q4) and continuing at six-to-twelve-week intervals through the CME FedWatch tool's available forecast period, which extends through 25 September 2024 (2024-Q3).

For further details see: