Against the Wind
Geopolitics, inflation, and earnings are all problematic right now.
The S&P 500 closed in the red for the sixth straight session on Friday. The index has now put up a negative number for three weeks in a row. And its streak of five consecutive positive months is in serious jeopardy.This is not a normal April.
Usually, April is kind to investors.
Since 1950 and through 2023 it was in fact the second-best month for stocks with an average return of approximately 1.5 percent, according to Ryan Detrick of Carson Group.
Detrick has pointed out as well that stocks generally lag during the first half of April before surging in the second half of the month.
If it’s going to happen this April, it’ll have to be this week.
Digging a little deeper, numbers at the index level often lag things like breadth, the number of stocks making new highs and/or new lows, and shifting leadership among sectors and industries.
It’s fair to say this bull market has been on pause while funds flow into assets where people think they’ll find better returns moving forward. That’s the way these things work over time.
“Sector rotation is the lifeblood of bull markets” is how you’ll hear many technical analysts explain the process.
Friday’s headline numbers for the major indexes do indeed reveal some strange below-the-surface happenings – the Dow Jones Industrial Average closed up 0.56 percent, while the S&P 500 lost 0.88 percent and the Nasdaq Composite was down 2.05 percent.
That’s quite a spread. And it is as simple as Neflix $NFLX and Nvidia $NVDA and Meta Platforms $META and Amazon.com $AMZN weighing on the latter two indexes, with geopolitical tensions and inflation concerns providing significant background noise.
NFLX opened Big Tech reporting season on Friday with a substantial beat on new subscriber additions but also said it will no longer report that kind of data on a quarterly basis.
Wall Street has kept a close eye on that number as a key barometer of streaming-service health. NFLX prefers that analysts focus on revenue and profit, like it’s a mature company.
And that’s why NFLX, which is following along with Apple $AAPL and META in holding back key numbers about unit growth and app subscribers, respectively, had its worst day in nine months, falling more than 9 percent.
Magnificent Seven reporting season gets underway when META reports after the close on Wednesday. Microsoft $MSFT and Google parent Alphabet $GOOGL will report after the close on Thursday.
AMZN is scheduled to report on April 30, Apple $AAPL on May 2, and NVDA on May 22.
The weekend was relatively quiet on the Iran-Israel front, though the US Congress did pass a bill to provide military support to its ally in the Middle East as well as to Ukraine and Taiwan.
And we should look forward to what will probably be a “dovish” print for the Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge.