Tech Stocks Get Slammed; Bonds Also Down

The Dow (+0.0%), NASDAQ (-5.5%), and S&P 500 (-3.0%) were mostly down sharply for the week.  Taxable bonds were down 0.6% and tax-free municipal bonds were down 0.3%.  The 10-year Treasury yield rose 0.09% to close the week at 4.61%.

Technology stocks got crushed last week, losing 7.3% and dragging down the tech-heavy NASDAQ.  More defensive sectors like healthcare, consumer staples, and utilities held up well, resulting in a roughly flat Dow.  The market performance last week was mainly caused by fairly strong economic reports, which were followed by a Fed member commenting that the easing inflationary pressures have “stalled” and it “makes sense” to extend the pause in interest rates, rather than cutting them.  In fact, we started the year with an expectation of 3 – 6 rate cuts, and the bond market is now pricing in only one cut in 2024.  In short, investors were hoping and waiting for interest rate cuts, and those chances are dwindling.  It also didn’t help last week that the Middle East tensions continue to rise.

Leading Economic Indicators (LEIs) – my favorite economic data point – reported another downturn last month.  LEIs have remained in negative territory for almost two years, which is astonishingly long, and have historically been a good predictor of a forthcoming recession.  We are also in the early stages of earnings season, as companies are reporting a “normal” number of better-than-expected earnings reports.  However, a much lower number are exceeding forecasts on revenue.  Corporate earnings reports and forecasts for the next quarter will likely have a large impact on the markets’ movements over the next few weeks.

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_{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.}