The S&P 500 Index (SP500) on Friday. retreated 3.05% for the week which ended at 4,967.23 points, recording losses in all five sessions. The related SPDR S&P 500 ETF Trust (NYSEARCA:SPY) slipped 3.07% for the week.
It’s been a tough five days for the benchmark indicator it slumped to its worst weekly performance since early March last year. Additionally, the indicator slipped below the key 5,000-point level for the first time since late February, and is now down more than 5% since hitting a record closing high of 5,254.35 nearly two months ago.
This week’s retreat was driven by stronger-than-expected economic data which, combined with hawkish Fed speech, led market participants to significantly scale back their interest rate cut expectations as they realize that the central bank it is in no hurry to ease monetary policy. Additionally, geopolitical concerns over Israel and Iran, along with a persistent bond sell-off, also put pressure on stocks.
On Monday, retail sales fared well for March, pointing to robust consumer spending that is good for growth but a problem for a Fed trying to cool inflation. On Tuesday, Fed Chair Jerome Powell stung markets by pointing out during a moderated discussion that recent data had shown a lack of further progress on inflation.
Wednesday and Thursday were dominated by quarterly earnings. Chip stocks took over this week, after Dutch semiconductor equipment maker ASML (ASML) and the world’s largest contract chipmaker Taiwan Semiconductor Manufacturing (TSM) disappointed with their earnings reports. Additionally, artificial intelligence (AI) server maker Super Micro Computer (SMCI) suffered a huge slump after failing to provide preliminary data alongside its earnings announcement as it usually does.
The decline in chip stocks sent the overall S&P 500 tech sector down more than 7% for the week. Taiwan Semi’s (TSM) warning about growth forecasts for the overall semiconductor market in 2024 and the decline of Super Micro (SMCI) in particular led Cestrian Capital Research’s Alex King to proclaim that this week “marked the end of the dream of artificial intelligence”.
Added to all this this week is the tense situation in the Middle East. Last weekend, Iran launched drones at Israel in retaliation for the suspected Israeli attack on the Iranian embassy in Syria on April 1. World leaders and allies from both countries have spent this week urging against the escalation, but media on Friday said Israel had launched a retaliatory attack. against Iran.
Traders reacted to the week’s developments by dumping bonds, sending Treasury yields higher and putting pressure on stocks.
See how Treasury yields have fared along the curve on the Seeking Alpha bonds page.
Next week, the first-quarter earnings season will kick into new gear with a deluge of companies. The biggest names reporting will be Microsoft (MSFT), Alphabet (GOOG) (GOOGL), Amazon (AMZN), Meta Platforms (META), and Tesla (TSLA).
As for the weekly performance of the S&P 500 (SP500) sectors, eight of the 11 closed in the red. Tech fell a whopping ~7% and led the losers. Defensive sectors, utilities and consumer staples, posted the biggest gains. Below is a breakdown of the performance of the sectors and their associated SPDR Select Sector ETFs from the close of April 12th to the close of April 19th:
No. 1: Utilities +1.87%and the Utilities Select Sector SPDR Fund ETF (XLU) +1.92%.
No. 2: Basic necessities +1.44%and the SPDR Select Sector Consumer Staples Fund ETF (XLP) +1.44%.
No. 3: Financials +0.81%and the SPDR Financial Select Sector Fund ETF (XLF) +0.80%.
#4: Healthcare -0.01%and the Health Care Select Sector SPDR Fund ETF (XLV) +0.02%.
#5: Materials -1.09%and the Materials Select Sector SPDR Fund ETF (XLB) -1.07%.
#6: Energy -1.22%and the Energy Select Sector SPDR Fund ETF (XLE) -1.98%.
#7: Industrials -2.01%and the SPDR Industrial Select Sector Fund ETF (XLI) -1.98%.
No. 8: Communication services -3.23%and the SPDR Fund for the selected communications services sector (XLC) -2.29%.
No. 9: Real estate -3.64%and the Real Estate Select Sector SPDR Fund ETF (XLRE) -3.65%.
#10: Consumer Discretionary -4.52%and the SPDR Consumer Discretionary Select Sector ETF (XLY) -4.15%.
#11: Information Technology -7.26%and the Technology Select Sector SPDR Fund ETF (XLK) -6.27%.
For investors looking ahead to what’s happening, check out the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.