Weekly Market Insights: Economy Slows; Stocks Retreat

On Friday, a sharp sell-off sent major stock market indices into negative territory for the week, capping a volatile close to April.

The Dow Jones Industrial Average declined 2.47%, while the Standard & Poor’s 500 tumbled 3.27%. The Nasdaq Composite index dropped 3.93% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 3.33%.1,2,3

Stocks Slide

Trading was volatile in the final week of April as investors struggled with the crosscurrents of global economic growth anxieties stemming from widening COVID-related lockdowns in China and a fresh batch of corporate earnings reports.

Monday set the tone for the week. Stocks staged an intraday reversal, wiping out a deep morning decline to end the day higher. After broad losses on Tuesday and a choppy session on Wednesday, stocks mounted a powerful rally Thursday thanks to positive corporate earnings reports, overcoming a disappointing first-quarter Gross Domestic Product report. Stocks could not sustain Thursday’s momentum, as Friday witnessed a broad-based retreat to cement another week of losses.

Economy Contracts

Following the torrid 6.9% annualized GDP growth rate in the fourth quarter, economists had expected economic growth to moderate to about a one-percent gain in the first quarter. Instead, the economy shrank at an annualized rate of 1.4%, dented by a slowdown in inventory investment by businesses, a jump in the trade deficit, and a decline in defense spending.

Consumer spending held up, rising 2.7%, though the gain was amid higher prices. Some economists expect the economy to resume its expansion for the remainder of the year, which may be one reason investors shrugged off the negative surprise.4

This Week: Key Economic Data

  • Monday: Institute for Supply Management (ISM) Manufacturing Index.
  • Tuesday: Factory Orders. Job Openings and Turnover Survey (JOLTS).
  • Wednesday: Federal Open Market Committee (FOMC) Announcement. Automated Data Processing (ADP) Employment Report. Institute for Supply Management (ISM) Services Index.
  • Thursday: Jobless Claims. 
  • Friday: Employment Situation.

Footnotes and Sources

  1. The Wall Street Journal, April 29, 2022
  2. The Wall Street Journal, April 29, 2022
  3. The Wall Street Journal, April 29, 2022
  4. CNBC, April 28, 2022
  5. IRS.gov, February 17, 20216. Healthline.com, February 22, 2022

Paul Ellis
Photo of Paul Ellis, CIMA®.

Paul Ellis, CIMA® may be reached at 425.405.7720 or paul.ellis@elliswealthmanagement.net.

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