Weekly Market Performance — April 12, 2024

LPL Research provides its Weekly Market Performance for the week of April 8, 2024. Stocks traded lower for a second straight week as sticky consumer inflation data led to reduced rate cut expectations. Treasury yields and the dollar surged higher amid the repricing. Escalating geopolitical tensions in the Middle East further weighed on risk appetite.   

Selling pressure was widespread as all 11 S&P 500 sectors traded lower. Small caps underperformed, and the Russell 2000 fell back into negative territory for the year. The kickoff of earnings season provided little relief as most of the big banks out with results reported disappointing net interest income and/or guidance.  

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 04/12/24 at 2:45 p.m. ET.
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

Markets: Stocks struggled this week against a backdrop of hotter-than-expected consumer inflation, surging interest rates, and escalating geopolitical tensions in the Middle East. Earnings season kicked off earlier today and provided little relief for stocks. JPMorgan Chase (JPM) and Wells Fargo (WFC) reported disappointing net interest income, offsetting top and bottom-line beats from both companies. In other corporate news, Apple (AAPL) announced plans to overhaul its Mac lineup with new artificial intelligence-focused processors made in-house. Shares rallied on the news, helping support the broader tech sector. Expectations for an imminent Iranian attack in Israel further weighed on risk appetite.  

For the week, the S&P 500 traded down over 1% and closed below key support at the 20-day moving average — a consistent spot for demand during dips this year. Selling pressure was widespread as nearly 90% of constituents declined on the week. Small caps underperformed, and the Russell 2000 sank around 2.5%, bringing its year-to-date performance back into the red. All 11 S&P 500 sectors finished lower, with financials leading losses due in part to outsized selling pressure in Morgan Stanley (MS). The company came under pressure after reports their wealth management unit was under investigation due to its anti-money laundering practices.    

Fixed Income: The Bloomberg Aggregate Bond Index finished the week lower as Treasury yields rose on the back of higher-than-expected inflation data. However, Treasuries rallied on Friday as demand for safe-haven assets picked up due to growing concerns out of the Middle East.   

This week’s hotter-than-expected inflation pushed Treasury yields to year-to-date highs, with Treasury securities across the curve higher by 0.15% to 0.20%. Further adding to the sell-off, was by all metrics, a pretty disastrous 10-year Treasury auction that saw below-average demand, forcing the Treasury department to “pay up” for interest. The Treasury market’s repricing effectively took another rate cut off the table for 2024, with markets hoping for one, maybe two cuts this year. The repricing out of rate cuts has generally equaled a 0.10% to 0.15% move higher in the 10-year yield, so further repricing may push the 10-year yield up to around 4.75%. If there is a silver lining to the sell-off in the bond market, it’s that yields for high-quality fixed income remain elevated and provide very attractive (relative to history) income opportunities. And while price appreciation may be limited until inflationary pressures abate, which we think will happen, income levels remain attractive. 

Commodities: The broader commodities complex finished flat on the week, despite a notably stronger dollar. The greenback was propped up by safe-haven demand, the potential for diverging monetary policies between the Federal Reserve (Fed) and European Central Bank (ECB), and higher domestic yields. Metals shrugged off the dollar’s rally and outperformed. Platinum jumped around 6% and outshined gains in gold and silver of around 1.0% and 2.8%, respectively. West Texas Intermediate (WTI) oil dipped lower as overbought conditions and a bearish demand outlook from the International Energy Agency (IEA) offset oil’s rising geopolitical risk premium. The threat of Iranian escalation via a potential air strike within Israel could severely disrupt supply in the region and send prices higher.     

Economic Weekly Highlights

March Consumer Price Index (CPI): March inflation rose 0.4% from a month ago, the same pace as February and not the deceleration markets expected. Rising gas prices and higher shelter costs contributed over half of the monthly increase to the headline. The annual rate of inflation accelerated in March to 3.5% from 3.2% last month. We did get some good news — vehicle prices fell in March by over 1%. 

Inflation is still running hot because consumers still have plenty of capacity to spend, putting upward pressure on prices. The gold market is telling investors that inflation pressures could linger longer than the Fed would want. Should the Fed get backed into a corner and hold rates steady longer than expected, we should expect some volatility in the currency markets, especially if the ECB cuts rates this summer and Japan intervenes with their currency.  

April University of Michigan Sentiment: A few things are noteworthy in today’s release. More consumers believe their household finances are worse off from a year ago, but that may be more a perception than reality. If true, deteriorating household finances will impact spending, shifting consumers more into a defensive posture. An increasing number of consumers find now is a bad time to buy a vehicle or a home, providing a hint that the spending splurge could fade in the near term. Investors should give careful attention to the upcoming earnings reports from luxury retailers for a fresh perspective on the health of the consumer.   

The Week Ahead

The following economic data is slated for the week ahead:   

• Monday: Retail Sales (Mar) 
• Tuesday: Housing Starts (Mar), Building Permits (Mar), Fed Chair Jerome Powell Q&A 
• Wednesday:  Federal Reserve Beige Book 
• Thursday: Weekly initial and continuing unemployment claims, Leading Index (Mar), Existing home sales (Mar)