Stocks Slide in Volatile Week; Bonds Drop Sharply
Good morning,
The Dow (-0.4%), NASDAQ (-2.1%), S&P 500 (-0.6%), and EAFE (+0.5%) were mixed last week. Meanwhile, bonds fell sharply, as taxable bonds slipped 0.7% and tax-free municipal bonds dropped 1.2%. The 10-year Treasury yield rose 0.13% to reach 4.68%, its highest level since January 2025.
US stocks responded last week to the Middle East crisis and the beginning of Big Tech earnings reports. Despite Friday’s large gains that reduced steeper losses, stocks finished the week lower. The war with Iran increased intensity again, raising concerns regarding oil supply from the Strait of Hormuz, which sparked inflation worries again. Those worries adversely impact both stocks and bonds for the week. As for corporate earnings, two big tech companies (Google [-7.8%] and Tesla [-17.8%]) reported revenue and earnings that exceeded expectations, but got slaughtered based on their projected and continued spending on AI. Investors are getting concerned that the big technology companies are spending billions of dollars on AI and not showing an adequate return on investment. The Magnificent 7 stocks fell 5.6% last week, dragging the tech-heavy NASDAQ down harder than the other indexes.
This week is expected to be the biggest week of the quarter for economic data. Four (Microsoft, Amazon, Apple, and Meta) of the remaining Magnificent 7 stocks will be reporting earnings this week, and investors can be expected to focus on their capital spending, which punished Tesla and Google last week. On Wednesday, the Fed meets again to announce if it will raise, lower, or keep interest rates the same. It is unlikely they lower rates, and if they raise rates, it will likely be followed by a sharp market downturn, but few pundits are expecting a rate increase. Lastly, and maybe most importantly, there appears to be some progress in negotiations between the US and Iran, as attacks by each country have stopped over the weekend. As a result, stocks are poised to open sharply higher this morning, while oil prices and interest rates are falling. Before getting too excited, I’ve seen this play out several times in the past couple months. Do you remember “The boy who cried wolf”? I will believe it when I see it.
Have a great day and terrific week!
Source: Yahoo Finance
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
