The Week on Wall Street
Stocks showed mixed results last week as recession fears resurfaced in response to weak economic data and a tepid start to a new corporate earnings season.
The Dow Jones Industrial Average skidded 2.70%, while the Standard & Poor’s 500 declined 0.66%. But the Nasdaq Composite index gained 0.55% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 0.50%.1,2,3
Mixed Economic Data
Stocks weakened to start the week amid discouraging corporate earnings and troubling economic data. Disappointing retail sales and manufacturing reports sparked concerns that the Fed may have gone too far in hiking rates, while a drop in initial jobless claims diminished chances of a near-term pause in rate hikes. Welcome news from two big technology names on Friday powered a strong rally that mixed significant indices.
The start of the earnings season was a drag on investor sentiment. While 69% of the S&P 500 constituent companies that reported earnings by Thursday (48 companies) exceeded expectations, the percentage of “beats” is below the three-year average. More concerning, however, was that average earnings declined by more than 2%.4
Retail sales fell 1.1% in December, capping an overall weak holiday shopping season. November retail sales were revised downward to -1.0%, from the earlier estimate of -0.6%. Compared to November-December 2021, sales increased by 5.3%, below the 6 to 8% increase expected by The National Retail Federation.5,6
Many economists viewed these lackluster numbers as evidence of a weakening consumer. A more cautious consumer raises more concerns about a recession at some point this year since the primary driver of U.S. economic growth is consumer spending.
T H E W E E K L Y R I D D L E
Take one letter out of a 7-letter word and it becomes longer. What is this word?
LAST WEEK’S RIDDLE: You need to take a gallon of oil out of a barrel of oil. How can you do it using only a 3-gallon container and a 5-gallon container?
ANSWER: Fill the 3-gallon container with oil and pour it into the 5-gallon container. Then fill the 3-gallon container again and use it to fill the 5-gallon container the rest of the way. One gallon will be left in the 3-gallon container.
Q U O T E O F T H E W E E K
“Writing is thinking on paper.” WILLIAM ZINSSER
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