Stocks had a turbulent week, with modest gains on Friday not enough to reverse losses incurred earlier in the week. The S&P 500 closed higher by 1.11% and the Nasdaq Composite was up 1.24% on Friday, but both indices ended the week lower overall. Volatility increased by 23% during the week, likely due to stronger-than-expected jobs numbers on Friday and upcoming economic data releases. Both gold and oil prices saw strong rallies last week, with gold closing up 5% and oil prices jumping 4% amid rising tensions in the Middle East.
Several individual stocks were in the spotlight last week, including Tesla, whose shares dropped by over 6% following disappointing delivery numbers. Despite this, Cathie Wood’s Ark Innovation reportedly added 2.3 million Tesla shares to its portfolio since December, making it the fund’s second-largest holding at 9.6%. Taiwan Semiconductor shares saw a slight increase in premarket trading after reports that the Biden Administration is set to grant the chip maker $6.6 billion in federal grants for expanding its manufacturing facilities in Arizona. However, Boeing shares fell after a flight experienced an engine issue shortly after takeoff.
In merger news, Johnson and Johnson announced a deal to acquire Shockwave Medical for $13.1 billion, while Alphabet, Google’s parent company, is reportedly exploring an acquisition of online marketing software company HubSpot, which has a market valuation of $35 billion. This potential acquisition by Alphabet is expected to face regulatory scrutiny given the size of the two companies. Looking ahead to the second week of April, markets will have a lot of new data to digest, including the start of the second-quarter earnings season on Friday with banks set to kick things off.
The current economic data indicates a strong economy, leading to revised expectations for interest rate cuts by the Federal Reserve. Previously, markets had anticipated multiple rate cuts in 2024, but now expectations have fallen to as little as no cuts or just two. This shift reflects the strength of the economy, with the market likely needing strong earnings growth to sustain upward momentum. Consensus estimates for the second-quarter earnings season are forecasting 9.4% earnings growth, with attention focused on companies like Nvidia, which has seen a significant increase in its share price this year.
Upcoming economic data releases this week include the Consumer Price Index (CPI) on Wednesday and the Produce Price Index on Thursday. Forecasts predict a 0.3% month-over-month increase in CPI and a 3.4% year-over-year increase, with Core CPI, excluding food and energy prices, expected to rise by 0.3% month-over-month and 3.7% year-over-year. Bond prices were down nearly 1% in premarket trading, with the yield on the 10-year note reaching its highest level since November at 4.46%. This suggests that the market believes interest rates are unlikely to decrease significantly, placing added emphasis on strong earnings to drive market performance. Investors are advised to stick with their investing plans and long-term objectives amidst market volatility.
