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Thus far this earnings season, despite solid results, stocks have been taking a beating, even though they are generally keeping pace with previous growth. Investors are hoping that dynamic will change in the week ahead as mega tech, marquee companies such as Microsoft, Alphabet and Apple begin to report earnings, and, along with economic data provide the positive momentum for a market rebound.
Still, rising costs and the most hawkish Fed since 2006 have acted as a deterrent, keeping equity investors from increasing their positions in this economic environment.
On Friday, the S&P 500 Index slumped for the third straight day, for a total loss of 4.25%. It was also, however, the broad benchmark's third weekly loss in a row, for a total drop of 6%. Additionally, the declines this past week were the longest weekly losing streak for the index since October 2020, with tech stocks leading the slide lower.
The 30 component Dow Jones Industrial Average tumbled 3.8% over the final two days of the trading week after losing 3.1% of value during the previous four weeks. Among the benchmark indices the mega cap Dow has the most extended weekly losing streak, despite outperforming on a percentage basis, given that investors have been rotating from tech growth shares to value stocks.
The NASDAQ 100 declined 6% over the last three consecutive trading days, giving up 10.2%, falling below its 100-Week MA after finding resistance by the 50 WMA.
The Russell 2000 dropped 4.8% during a two-day selloff, losing 3.4% of value over the course of the week. Still, among the major US indices which have all recently been seeing multiple-week declines, the small cap index was the only gauge to start slipping this past week.
However, the technical chart of the Russell 2000 looks the weakest.
The small-cap benchmark closed below its rising channel on Friday, suggesting this was but a return move for the index, which was the first to top out and enter a bear market. After finding resistance by the 50 WMA, it fell below the 200 WMA, which has been reinforcing the return-move/rising channel.
For all the bearish stock market sentiment on display as the trading week came to a close, some investors are hoping the heart of this earnings season—when large cap tech names begin reporting—will provide some dip-buying opportunities. Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) release earnings on Tuesday after the market close. Facebook parent Meta Platforms (NASDAQ:FB) reports on Wednesday after the close, followed by Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) which report results on Thursday also after the close.
Along with high-profile earnings, the Fed's favorite inflation gauge, the Personal Consumption Expenditure Index, prints on Friday providing yet an additional potential catalyst for market volatility. Will it reinforce the Fed's tightening moves, or show that, as some have argued, inflation may have peaked?
The most significant adverse indicator for earnings season—and investors—to date, was last week's Netflix (NASDAQ:NFLX) earnings report which simply shocked markets.
After the streaming giant reported its first subscriber loss in a decade, the stock lost more than a third of its value in a single day, dropping 35% on Wednesday. Shares fell to their lowest level since January 2018 after cutting through each of the major weekly MAs, even as the 50 WMA was bearing down on the 100 WMA for a bearish cross.
The concern that consumers are cutting back on non-essentials amid spiking inflation also sent streaming giant Warner Brothers Discovery (NASDAQ:WBD) 6% lower on the same day which proceeded to become a three-day-straight selloff for a total drop of 16% by the end of the trading week.
Perhaps worse, the negative sentiment spread beyond streaming entertainment services, tainting speculative companies in general, including solar energy plays, which fell while the broader market on Wednesday maintained previous gains.
After the NASDAQ 100 dropped 19.4% from its November record, investors are waiting to see if this coming week's giant tech company results might provide the index, and the broader market overall, the boost it sorely needs. What might such a rebound look like?
Some traders are hoping the price will find a floor, creating the right shoulder of an H&S bottom, with the 200 DMA acting as a neckline. This would be an excellent time to remind readers that the tech-heavy index is in a bear market after having fallen 21.4% from its Nov. 19 record to the March low.
Also, the 100 DMA just dropped below the 200 DMA after the 50 DMA had already done so and triggered a Death Cross. Now, all three major MAs are in a bearish pattern. Therefore, we're betting tech stocks are headed lower rather than higher.
Also, as mentioned above, solid earnings until now haven't helped stocks because of investor jitters about escalating inflation and spiking interest rates. Until that sentiment shifts, we have no reason to expect stocks to suddenly rebound.
The potential for that to happen could only occur on Friday when the Fed's go-to indicator, core PCE, which doesn't include volatile energy and food prices, is released. It jumped 5.4% in February. If it eases, jittery sentiment could reverse.
Meanwhile, 10-year yields finished up for the sixth out of seven weeks, suggesting investors are still pricing in higher inflation and interest rates.
The 50-Week MA is about to cross the 200-Week MA, triggering a Golden Cross for yields, which is, in fact, a Death Cross for the underlying bonds, with whom they possess an inverse relationship.
The dollar has been climbing for three straight weeks, matching the recent yield trajectory.
The greenback's 50 WMA just crossed the 100 WMA, and, when it surpasses the 200 WMA, will trigger a Golden Cross.
Gold fell to the bottom of a Symmetrical Triangle.
We expect the precious metal to find support and break to the topside, continuing the uptrend set by the previous huge Symmetrical Triangle.
After falling for three straight weeks, Bitcoin has found its footing at the bottom of a rising channel.
We're still waiting for the cryptocurrency's previous H&S to take effect.
Oil fell about 4.5% for the week.
WTI's move appears to have undermined the dynamics of a Symmetrical Triangle. Given that the price meandered through the vertex, we expect this pattern to be moot. We await additional moves.
All times listed are EDT
4:00: Germany – Ifo Business Climate: expected to edge down to 89.1 from 90.8.
8:30: US – Core Durable Goods Orders: seen to jump to 0.6% from -0.6%.
10:00: US – CB Consumer Confidence: probably edged higher, to 108.0 from 107.2.
10:00: US – New Home Sales: predicted to slip to 765K from 772K.
21:30: Australia – CPI: anticipated to climb to 1.7% from 1.3%.
10:00: US – Pending Home Sales: likely to rise to -1.5% from -4.1%.
10:30: US – Crude Oil Inventories: forecast to surge to 2.471M from -8.020M.
21:30: Australia – Retail Sales: seen to fall to 1.0% in March from 1.8%.
Tentative: Japan – BoJ Monetary Policy Statement, Outlook Report
23:00: Japan – BoJ Interest Rate Decision
Tentative: Japan – BoJ Press Conference
8:30: US – GDP: forecast to plummet to 1.1% from 6.9% QoQ.
8:30: US – Initial Jobless Claims: predicted to edge lower to 180K from 184K.
21:45: China – Caixin Manufacturing PMI: expected to rise to 50.0 from 48.1.
4:00: Germany – GDP: seen to rise to 0.2% from -0.3% QoQ.
5:00: Eurozone – CPI: likely to have remained steady at 7.4 YoY.
6:30: Russia – Interest Rate Decision: forecast to jump to 20.00% from 17.00%.
8:30: Canada – GDP: to jump to 0.8% from 0.2% MoM.
21:30: China – Manufacturing PMI: likely to have ticked higher, to 49.9 from 49.5.
21:45: China – Caixin Manufacturing PMI: previous print came in at 48.1.
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