Stocks Pull Back Before Inflation Data and Earnings Season


Stocks began the second quarter with a pullback as investors worried about higher interest rates and geopolitical risk.

The S&P 500 fell almost 1 percent between Thursday, March 28, and Friday, April 5. (Markets were closed on March 29.) It was the biggest weekly drop since the beginning of 2024. More than two-thirds of the index’s members lost value, along with nine of the 11 major sectors.

The Institute for Supply Management’s manufacturing index unexpectedly rose above 50, which means the sector is expanding. Strong orders, production and hiring fueled the move. ADP’s private-sector payrolls report and the government’s non-farm payrolls report both exceeded forecasts. The 10-year Treasury yield rose to its highest level since November in response.

Federal Reserve Chair Jerome Powell said he needs “greater confidence” of inflation nearing 2 percent before cutting rates. He’ll get a key piece of data this Wednesday when the government issues the consumer price index (CPI) for March. Governor Michelle Bowman also floated the idea of another rate increase unless prices come down.

Biggest Gainers in the S&P 500 Last Week
General Electric (GE)+12%
Newmont Goldcorp (NEM)+11%
Marathon Petroleum (MPC)+8.7%
Meta Platforms (META)+8.6%
NRG Energy (NRG)+7.5%
Source: TradeStation Data

Investors additionally worried about the Middle East after Iran’s embassy in Damascus was bombed and Gaza aid workers were killed. Those events helped push crude-oil futures (@CL) to their highest level since October.

Another story last week was surprising strength in China after the Caixin manufacturing index rose to a 13-month high. That also boosted demand for commodities like oil and copper.

Energy, Metals Lead

Energy stocks were the biggest gainers last week and are now the top-performing sector this year. Gold and silver miners also rallied. While those metals tend to benefit from lower interest rates, last week they followed momentum from early March. Gold hit a new record and silver reached its highest level in 34 months.

Gold futures (@GC), weekly chart, showing long-term levels.

Communications was the only other positive sector, boosted by Meta Platforms (META) and Netflix (NFLX). META jumped on positive notes from Jefferies and Wedbush, which see further gains in advertising and artificial intelligence.

NFLX is expected benefit from price increases and subscriber growth, according to Pivotal Research.

Oil refinery Marathon Petroleum (MPC) jumped as gasoline inventories shrank and Ukraine attacked more facilities in Russia.

Retailers, solar energy and biotechnology led to the downside last week.

Lamb Weston (LW) had its biggest weekly drop since the pandemic after a change in its enterprise resource planning (ERP) system hurt its ability to fill orders. The food company cut guidance but said operations have returned to normal.

Ulta Beauty (ULTA) plunged after warning of soft demand for cosmetics. Walgreen Boots Alliance (WBA) dropped to its lowest price in almost 25 years as it struggles with high costs and a hefty debt load.

GE and Tesla

Last week also featured big news on two major companies.

General Electric, which pioneered the spread of electricity in the late 19th century and grew into a sprawling conglomerate in the late 20th century, completed a historic breakup. The original company will now focus on jet engines and avionics. It changed its name to “GE Aerospace” and keeps the symbol GE.

GE Vernova (GEV) was spun off. It will house electric-generation businesses like turbines. Another part of the old company, GE HealthCare Technologies (GEHC), became independent in December 2022.

Tesla (TSLA), named after the scientist who outsmarted Thomas Edison and GE in the 1890s, reported quarterly deliveries of 386,810 vehicles. It was a drop of 8.5 percent and the company’s biggest miss ever, according to Bespoke Research. TSLA remains the worst performer in the S&P 500 this year, according to TradeStation data.

S&P 500, daily chart, with select indicators. Dotted lines show prices holding weekly lows.

Charting the Market

Last week was relatively bearish for the S&P 500 compared with its trend since early November. The index peaked early in the week and slid through Thursday. It broke its 21-day exponential moving average for the first time since January 4, but rebounded on Friday.

Oscillators like Rate of Change and Wilder’s Relative Strength Index (RSI) showed slowing momentum by falling to their lowest readings since early November.

Still, the index remained above a weekly low from March 19. That follows a recent pattern of pullbacks remaining tight. Such price action may suggest there are few sellers.

The sideways movement potentially reveals uncertainty as investors consider catalysts like earnings and interest rates. Is the index peaking — or consolidating before another move higher? Events like Wednesday’s CPI report and the approach of quarterly results in the next few weeks could answer that question.

The Week Ahead

This week begins quietly and builds toward big events on Wednesday, Thursday and Friday.

Nothing important is scheduled for today or tomorrow.

Biggest Decliners in the S&P 500 Last Week
Lamb Weston (LW)-25%
Ulta Salon (ULTA)-15%
Intel (INTC)-12%
Walgreen Boots Alliance (WBA)-12%
American Airlines (AAL)-10%
Source: TradeStation Data

Wednesday morning brings CPI at 8:30 a.m. ET. Traders will view it as an important indicator for inflation and interest rates. Delta Airlines (DAL) also reports earnings in the premarket.

At least two other important events occur during the session. The Energy Department reports crude-oil inventories at 10:30 a.m. and the Fed releases minutes from its last meeting at 2 p.m. Both could impact trading.

Thursday features the producer price index, another inflation gauge, and initial jobless claims.

Friday brings consumer sentiment. It’s also the first big day of earnings season as major banks like JPMorgan Chase (JPM), Citi (C) and Wells Fargo (WFC) issue results.

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