Week in Review: April 21, 2023

Markets ended the week mixed, with the S&P 500 little changed, as investors analyzed a spate of corporate earnings reports and the latest economic data. After a tumultuous 2022, followed by a sizeable rebound in the first quarter, investors appear to currently be taking more of a wait and see approach.

On the one hand, there is growing concern that the economy is poised to enter recession in the second half of the year. Should that occur, current corporate earnings expectations likely remain too high, leaving equity markets susceptible to further downside volatility. On the other hand, current interest rate forecasts show the Fed raising rates once more in May by 0.25% and then cutting rates by 0.25% in both November and December. The idea that the Fed is close to ending its rate hikes, coupled with expectations for additional slowing in inflation, could serve as a catalyst for equity markets to continue their rebound from last year’s lows. For the week, investors appeared content to simply let the earnings season unfold without taking any drastic actions. The same sentiment seemed to prevail in the bond markets, where the 10-Year Treasury yield was little change, rising just 0.06%.

Through Friday, 18% of S&P 500 companies had reported 1Q23 earnings. Thus far, 76% of companies have exceeded expectations. According to industry group FactSet, consolidated earnings growth for the quarter is expected to be -6.2%, which would mark the second consecutive quarter of negative earnings growth, and largest decline since 2Q20.

Economic Commentary