The S&P 500 Ends Downturn, Up 2.7% This Week

Key Points:

• S&P 500 achieved its best weekly performance since November, rising 2.7% and reversing previous downturns.
• 80% of S&P 500 companies beat earnings expectations; Federal Reserve’s meeting and nonfarm payrolls report closely watched.

This week, the S&P 500 exhibited a robust performance, marking a significant reversal from its previous three-week downturn. The index climbed by 0.27% on Monday, culminating in a weekly gain of 2.7%. This performance represents the best weekly outcome since November, effectively ending a streak of negative results. Such a positive shift in momentum underscores growing investor confidence, possibly buoyed by better-than-expected corporate earnings and a stabilising economic outlook.

Dow Rises 0.7%, Nasdaq Jumps 4.2% in Strong Weekly Finish.

On Monday, the Dow Jones Industrial Average also enjoyed positive movements, rising by 109 points, or 0.28%. Over the week, the index saw a moderate increase of 0.7%. Meanwhile, the Nasdaq 100 outperformed, with a Monday increase of 0.38% and an impressive weekly surge of 4.2%. Like the S&P 500, the Nasdaq recorded its best weekly performance since November, marking its first winning week in the last five. This suggests a potential shift in market dynamics, with technology stocks possibly regaining favour among investors.

Corporate Earnings Season: 80% Success Rate in S&P 500

This week was pivotal due to several key events. The ongoing corporate earnings season saw major companies like McDonald’s, Coca-Cola, Apple, and Amazon report their results. Remarkably, about 80% of S&P 500 companies have surpassed earnings expectations, injecting optimism into the market. Additionally, the Federal Reserve’s meeting on Wednesday, although not expected to alter interest rates, was highly anticipated for its implications on future monetary policy. The week was rounded off with the nonfarm payrolls report on Friday, crucial for gauging the labour market’s strength and influence on monetary decisions.

Rate Hikes Shift From Growth to Policy Concerns

David Kostin, the Chief U.S. Equity Strategist at Goldman Sachs, provided a nuanced view of the current market environment. According to Kostin, the year-to-date reevaluation of economic growth expectations has largely supported the resilience observed in equity markets despite rising interest rates. However, he noted a recent pivot in the driving forces behind rate increases—from growth optimism to concerns over hawkish monetary policies—which has posed new challenges for the stock market.

Market Outlook: Corporate Performance vs. Monetary Policy

The interplay between corporate performance, economic indicators, and monetary policy will remain critical as the financial landscape evolves. Investors will closely monitor upcoming earnings reports and Federal Reserve signals for possible shifts in economic strategy. Market recovery signs suggest that upcoming decisions from policymakers and corporate leaders will be key for this year’s trajectory.