What Next After the S&P 500 Index Falls 2.7% Last Week
February 27 2023 - 04:42AM
The U.S. equity markets posted
their largest weekly decline in 2023 as inflation continued to
weigh heavily on investor sentiment. While the Dow Jones index fell
S&P 500 and Nasdaq
indices were down 2.7% and 3.3%, respectively, last
The core personal expenditures
priced index was up 0.6% in January and 4.7% year over year, which
was above consensus estimates. This metric is the preferred measure
of inflation for the Federal Reserve. Elevated numbers for
inflation indicate the central bank will have to keep raising
interest rates in the near term.
In an interview with CNBC, the
chief investment officer at Charles Schwab, Liz Ann Sonders
explained, “Another reason why the market is having trouble to some
degree, I think, is not just about inflation being hotter or
concerns that the Fed has to stay tighter for longer.
Sonders added, “But there was
just a lot of speculation that kicked back in —speculative froth.
And the market tends to move in a contrarian fashion when sentiment
gets a little too frothy. So I think some of the move has had to do
with sentiment. Not just these macro forces.”
Let’s see what should stock
market investors should expect in the upcoming week.
Wall Street earnings
Major retailers, including
COST), Kroger (NYSE:
KR), and Dollar Tree
DLTR) will be reporting quarterly earnings this week.
Target, which is the ninth-largest retailer in the U.S. in terms of
revenue, is forecast to report adjusted earnings of $1.39 per
share, a decline of 55% compared to the year-ago period. Last week,
Target also confirmed it would invest a whopping $100 billion to
upgrade supply chain networks and increase online sales.
Recently, retailers such as Walmart
topped Wall Street
estimates due to higher
non-discretionary spending by consumers. Retail sales in the U.S.
were also up 3% in January, despite a higher pricing
Student loans under the radar
The U.S. Supreme Court will hear
a couple of cases that could determine if Joe Biden’s student loan
exemption plan will pass. The program announced last August is
looking to cancel $10,000 of student loan debt per borrower or up
to $20,000 for recipients of the Pell Grant.
In case this plan is upheld,
around 40 million borrowers could see a part of their student loans
canceled, which would cost the government $400 billion.
Will home prices move lower in 2023?
S&P Global will release
its Case-Shiller National Home Price Index for December this week.
Further, Freddie Mac, which is a mortgage originator, will publish
the House Price Index, an indicator that tracks the prices of
The Case-Shiller index expects
home prices to fall 0.7% in December, the sixth consecutive month
of lower home prices. On a year-over-year basis, the index is
forecast to gain 6%, which is lower than the 6.8% rise in November
and much lower than the 21.3% gain last April. It would also be the
smallest increase annually since September 2020.
PMI reading forecast at 47.9
This week will also see the ISM
or Institute for Supply Management release the PMI (purchasing
managers index) reading for the month of February. The index tracks
the strength of the manufacturing and services sectors.
In February, the PMI for
manufacturing is forecast to rise to 47.9, compared to 47.4 in
The PMI will rise for the first
time in eight months as the industries have experienced a slowdown.
A reading of less than 50 indicates a contraction in business
However, non-manufacturing PMI is
forecast at 59.2 as activity in the Services sector remains
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