Markets Drop Sharply on Corporate News; Bonds Gain

The Dow (-2.5%), NASDAQ (-2.5%), and S&P 500 (-1.6%) each fell sharply for the week.  Meanwhile, taxable bonds gained 0.3% and tax-free municipal bonds gained 0.2%.  The 10-year Treasury yield fell 0.06% to finish the week at 4.42%.

In a holiday-shortened week, the markets were roughly flat until Friday, when nearly all the losses were incurred as a result of news about a healthcare giant.  On Friday, the Department of Justice (DOJ) announced that they were investigating United Health Group regarding their billing to Medicare, sending that stock plummeting, and taking the rest of the market with it.  On Thursday, retail giant Walmart gave disappointing forward-looking guidance, sending those shares down sharply, as it raised concerns with investors on the heels of a disappointing US retail sales report the prior week.

The Fed meeting minutes (from their late January meeting) were also released last week, and this may be the first time it ever caught my attention enough to mention it.  The Fed committee discussed uncertainties surrounding the political environment and the upside risks to their inflation outlook.  The end result is that interest rate cuts will likely be paused until the latter half of 2025, and that there may be fewer rate cuts overall than previously expected. 

It wasn’t all bad news last week, though.  Leading Economic Indicators (LEIs) continued to remain negative, but are showing signs of improvement, as the 6-month was much better, particularly with the manufacturing sector.  As for this week, bellwether chipmaking giant, Nvidia, reports its earnings on Wednesday after the market closes.  Then on Friday, the Fed-favored inflation gauge - Personal Consumption Expenditures (PCE) - will be reported.  More so with Nvidia earnings report, we can expect continued volatility this week.

Have a great day and terrific week!

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