Breakout or Breakdown? Stock Movement Grinds to a Halt as Investors Wait and See

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Stocks have stopped moving as investors wait for more news on corporate earnings and interest rates.

The S&P 500 slid 0.1 percent between Friday, April 14, and Friday, April 21. If that percentage change sounds small, consider that the index fluctuated less than 56 points between its high and low. That was the smallest weekly range since Thanksgiving of 2021, according to TradeStation data.

It could be the calm before a storm, with potentially market-moving events around the corner. First, this week, come quarterly results from major companies like Microsoft (MSFT), Alphabet (GOOGL) and Amazon.com (AMZN). Second, next week brings a Federal Reserve meeting and monthly employment data. Will earnings shrink less than feared? Has inflation slowed enough for rate hikes to pause? Or will a new wave of bearish news drive stocks back to their October lows?

These questions are obviously important, and investors don’t know what to think. That’s why they waited last week and may remain on the fence in the near term. But movement could resume by early May as more clarity emerges.

Biggest Gainers in the S&P 500 Last Week
Intuitive Surgical (ISRG)+12%
Snap-On (SNA)+9.6%
First Republic Bank (FRC)+8.7%
D.R. Horton (DHI)+8.5%
Las Vegas Sands (LVS)+8.2%
Source: TradeStation Data

Tesla Tanks

Tesla (TSLA) was a big mover last week, shedding 11 percent after profitability narrowed more than expected. CEO Elon Musk suggested he may favor more price cuts and thinner margins to gain market share. Albemarle (ALB), which provides lithium for electric vehicles, was the S&P 500’s biggest decliner after Chile moved to nationalize its mines.

Intuitive Surgical (ISRG) was the index’s best performer after beating profit and revenue forecasts.

Biotechnology was the top-performing industry after Merck (MRK) acquired drug developer Prometheus Biosciences (RXDX). Homebuilders also rallied on strong data and positive results from D.R. Horton (DHI).

Overall, sentiment shifted toward sectors like consumer staples and utilities that perform better in a slowdown. Cyclicals like energy and materials struggled.

The change came as economic reports showed further weakening. Initial jobless claims rose more than expected and leading economic indicators hit their lowest level in 1-1/2 years.

S&P 500, daily chart, with select indicators and patterns.

Charting the Market

As noted last week, the S&P 500 is between a falling trendline and some potential support levels. The index has remained in that tight range as volatility contracts. The price action could make some traders expect a potential breakout.

However, given the delays before major news, some investors may look for a retest of the 50-day moving average around 4034. There’s also potential support at 4070, a weekly low from early April.

The Week Ahead

More than one-third of the S&P 500’s members report earnings this week. The list includes three of the four trillion-dollar companies: MSFT, GOOGL and AMZN. Economic news is likely to be less important, although there are some noteworthy data points.

Coca-Cola (KO) issues results this morning. First Republic Bank (FRC), which plunged in March after Silicon Valley Bank failed, reports after the closing bell.

Biggest Decliners in the S&P 500 Last Week
Albemarle (ALB)-15%
CDW (CDW)-13%
Seagate Technology (STX)-12%
Tesla (TSLA)-11%
Moderna (MRNA)-10%
Source: TradeStation Data

General Motors (GM), McDonald’s (MCD) and Verizon Communications (VZ) are scheduled for tomorrow morning. MSFT and GOOGL are in the post-market, along with Visa (V) and Enphase Energy (ENPH). Consumer confidence and new home sales are due during the session.

Wednesday features durable-goods orders and crude-oil inventories. Boeing (BA) is the big name in the morning, followed by Meta Platforms (META) in the afternoon.

Initial jobless claims and gross domestic product are on Thursday morning. American Airlines (AAL) reports in the premarket. AMZN is in the postmarket.

Friday brings inflation-related numbers: the personal consumption expenditure (PCE) index for March and the employment cost index for the entire first quarter. Exxon Mobil (XOM) and Chevron (CVX) are the big earnings reports.

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