Company / Analytics

Week 16 in Brief

North America

On Friday, the main U.S. stock indices recorded slight gains, following mixed earnings outcomes. Investors were evaluating how contradictory economic data could impact interest rates, while also looking forward to a week packed with corporate reports.

According to a survey, U.S. business activity increased to an 11-month peak in April, adding to the uncertainty surrounding the Federal Reserve’s monetary policy, which was already muddled by earlier data in the week that suggested a weakening economy.

Despite investors anticipating weak results during the early stages of the first-quarter earnings season, the benchmark S&P 500 has been relatively steady. The upcoming week will bring a deluge of reports, including from megacap tech and growth firms whose shares have been instrumental in driving the S&P 500’s rally since the beginning of the year.

How did the major indices perform?

On Friday:

• The Dow Jones Industrial Average rose 22.34 points, or 0.07%
• The S&P 500 gained 3.73 points, or 0.09%
• The Nasdaq Composite added 12.90 points, or 0.11%, to 12,072.46.

For the week:

• The Dow Jones dipped 0.2%
• The S&P 500 slipped 0.1%.
• The Nasdaq lost 0.4%

What drove the U.S. market?

• On Friday, shares of Amazon climbed 3% following a research firm’s prediction that the e-commerce giant’s North American business would exceed Wall Street’s estimates.
• Albemarle’s stock plummeted 10% after Chile announced plans to nationalize the lithium industry.
• HCA Healthcare Inc (HCA.N) experienced a surge of about 4% in its shares after the hospital operator raised its forecasts for 2023. The positive report had a ripple effect on other hospital operators’ shares.
• Refinitiv data shows that analysts have largely maintained last week’s expectations of a nearly 5% year-on-year decline in quarterly profits for S&P 500 companies. “The unpredictability of earnings and revenue and guidance going forward has increased a lot,” noted Peter Tuz, president of Chase Investment Counsel. “You have signs that the economy is softening all over the place.”

How did the European markets perform?

• Strong quarterly earnings from SAP and EssilorLuxottica propelled European shares higher on Friday, despite a slump in the mining sector. The pan-European STOXX 600 index recorded a fifth consecutive week of gains, rising 0.4%.
• SAP SE, a business software maker, saw its stock soar 5.2% to a more than one-year high after reporting Q1 revenue that surpassed analysts’ expectations and announcing plans to incorporate generative AI into its products.
• European technology shares increased by 0.9%, and healthcare shares rose by 1.7%, leading the sectoral gains.
• Miners experienced the most significant decline, falling by 3.8% due to lower copper prices amid a lackluster demand outlook. This resulted in the index hitting a nearly one-month low.
• Surveys showed that the euro zone’s dominant services industry saw buoyant demand rise unexpectedly in April, outweighing a deepening manufacturing downturn and leading to a faster-than-anticipated economic recovery.

How did Asian markets perform?

• Data from the Statistics Bureau showed that Japan’s core inflation for March remained unchanged from February at 3.1%, causing Asia-Pacific markets to close lower on Friday.
• Mainland Chinese markets experienced the most significant losses in the region, with the Shenzhen Component shedding 2.28% to close at 11,450.43, and the Shanghai Composite dropping 1.95% to finish at 3,301.26.
• Hong Kong’s Hang Seng index markets slid 2.01% in the final hour of trade, while the Hang Seng Tech index tumbled 3.58%.
• The Nikkei 225 closed 0.33% lower at 28,564.37, and the Topix dropped 0.23% to finish at 2,035.06. Australia’s S&P/ASX 200 closed 0.43% lower at 7,330.40.

Bonds and Commodities

• The yield on 10-year Treasury notes increased by 2.3 basis points to 3.568%, while the two-year U.S. Treasury yield, which typically moves in line with interest rate expectations, was up 0.7 basis points at 4.177%.
• Crude prices saw modest gains on the day but fell for the week due to concerns about interest rate hikes and a looming recession.
• U.S. crude settled at $77.87 per barrel, up 0.65%, while Brent settled at $81.66, up 0.69% on the day.
• Chile’s President Gabriel Boric announced on Thursday his plan to nationalize the country’s lithium industry, the world’s second-largest producer of the metal essential in electric vehicle batteries, to improve its economy and safeguard its environment.
• Gold prices plummeted on Friday, headed for their worst week in eight, as hawkish statements from U.S. Federal Reserve officials throughout the week increased expectations for at least one more interest rate hike and bolstered the dollar.
• Spot gold dropped by 1.4% to $1,976.27 per ounce as of 12:18 p.m. ET, and U.S. gold futures fell 1.5% to $1,987.10.

Currencies

• Following gains from the PMI report, the dollar remained mostly unchanged. The dollar index dropped by 0.09%, with the euro advancing by 0.21% to $1.099. The greenback was poised to record its first weekly gain after five consecutive declines, which is its longest weekly slide in almost three years. This comes as investors increase their expectations that the Fed will raise interest rates next month.
• The Japanese yen gained 0.11% against the greenback to trade at 134.09 per dollar, while Sterling was flat at $1.2443.
• The South African rand weakened as expectations of a 25 basis points (bps) hike in interest rates by the U.S. Federal Reserve in May supported the dollar.
• The Canadian dollar fell to a three-week low against the U.S. dollar following domestic retail sales data, which indicated that the economy is being affected by higher borrowing costs.

Next week

Next week will be eventful as some of the largest corporations in the world will announce their earnings, including major tech firms such as Apple, Amazon, Google parent Alphabet, Microsoft, and Meta Platforms.

On Tuesday, we’ll learn the latest information on home prices, with the release of the Case-Shiller National Home Price Index for February, as well as new and pending home sales data for March.

On Thursday, the Bureau of Economic Analysis (BEA) will unveil its preliminary estimate for first-quarter gross domestic product (GDP). In addition, we can expect consumer sentiment updates from the Conference Board and University of Michigan.

Finally, on Friday, we’ll receive a crucial update on inflation with the release of the Personal Consumption Expenditures (PCE) Price Index, which is the Federal Reserve’s preferred measure of inflation, for March.