S&P 500 notches worst week in over a year (NYSEARCA:SPY)

The S&P 500 (SP500) on Friday retreated 3.05% for the week to end at 4,967.23 points, posting losses in all five sessions. Its accompanying SPDR S&P 500 ETF Trust (NYSEARCA:SPY) slipped 3.07% for the week.

A tough five days for the benchmark gauge saw it slump to its worst weekly performance since early March last year. Moreover, the gauge slipped below the key 5,000 points level for the first time since late February, and is now down more than 5% since notching a record closing high of 5,254.35 almost two months ago.

This week’s retreat was driven by stronger-than-anticipated economic data which, coupled with hawkish Fedspeak, led market participants to significantly dial back their interest rate cut expectations as they realize that the central bank is in no rush to ease monetary policy. Furthermore, geopolitical concerns over Israel and Iran along with a stubborn bond sell-off also put pressure on equities.

On Monday, retail sales came in hot for March, pointing to robust consumer spending which is good for growth but is a problem for a Fed trying to cool inflation. On Tuesday, Fed chair Jerome Powell dented markets by noting at a moderated discussion that recent data had showed a lack of further progress on inflation.

Wednesday and Thursday were dominated by quarterly earnings. Chip stocks took it on the chin 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. Moreover, maker of artificial intelligence (AI) servers Super Micro Computer (SMCI) saw an outsized slump after it did not provide any preliminary figures along with its earnings announcement like it usually does.

The decline in chip stocks sent the overall S&P 500 Technology sector cratering more than 7% for the week. Taiwan Semi’s (TSM) warning on growth forecast for the 2024 overall semiconductor market and Super Micro’s (SMCI) decline in particular even led Cestrian Capital Research‘s Alex King to proclaim that this week “marked the end of the AI dream.”

Added into the mix this week was a tense situation in the Middle East. Last weekend, Iran launched drones against Israel in retaliation to a suspected Israeli attack on Iran’s embassy in Syria on April 1. World leaders and allies of both countries spent this week urging against escalation, but on Friday media reports said that Israel launched a retaliatory strike against Iran.

Traders reacted to the week’s developments by dumping bonds, sending Treasury yields higher and putting pressure on equities.

See how Treasury yields have done across the curve at the Seeking Alpha bond page.

Next week, the first quarter earnings season will kick into another 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).

Turning to the weekly performance of the S&P 500 (SP500) sectors, eight of the 11 ended in the red. Technology slumped a whopping ~7% and led the losers. Defensive sectors Utilities and Consumer Staples topped the gainers. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from April 12 close to April 19 close:

#1: Utilities +1.87%, and the Utilities Select Sector SPDR Fund ETF (XLU) +1.92%.

#2: Consumer Staples +1.44%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +1.44%.

#3: Financials +0.81%, and the Financial Select Sector SPDR Fund ETF (XLF) +0.80%.

#4: Health Care -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 Industrial Select Sector SPDR Fund ETF (XLI) -1.98%.

#8: Communication Services -3.23%, and the Communication Services Select Sector SPDR Fund (XLC) -2.29%.

#9: Real Estate -3.64%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) -3.65%.

#10: Consumer Discretionary -4.52%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -4.15%.

#11: Information Technology -7.26%, and the Technology Select Sector SPDR Fund ETF (XLK) -6.27%.

For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.

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