S&P 500 sees worst week of 2024 (NYSEARCA:SPY)

The S&P 500 (SP500) on Friday retreated 0.95% for the week to end at 5,204.34 points, posting losses in three out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) slipped 0.89% for the week.

The benchmark index suffered its worst week of 2024, kicking off the second quarter of the year on a dour note following a stellar Q1 that saw the gauge climb more than 10%.

This week also marked only the fourth negative week of the year for the S&P (SP500). The decline was primarily driven by strong economic data on the labor market which increased bets that the Federal Reserve would be in no rush to cut interest rates. Additionally, a rally in commodities led to a resurgence in inflation fears, while a jump in Treasury yields also put pressure on equities.

With the data underscoring the resilience of the country’s labor market and economic strength, along with recent signs of sticky inflation, market participants have recalibrated their expectations of interest rate cuts. According to the CME FedWatch tool, the odds of a 25 basis point rate cut by the Fed at its June meeting has now slipped to about 46% from around 55% a week ago.

The “jobs week” was kicked off by the release of the latest Job Openings and Labor Turnover Survey on Tuesday, as per which job openings edged up to 8.756M in February from 8.748M in January. On Wednesday, data from ADP showed the addition of 184K jobs in the private sector in March, higher than the 155K jobs added in February.

Friday saw the release of the closely-watched nonfarm payrolls report for March. As per the U.S. Bureau of Labor Statistics, 303K nonfarm payrolls were added in March, well above the consensus of +212K and accelerating from the +270K reading in February. Meanwhile, the unemployment rate ticked down while the labor force participation rate inched up. Average hourly earnings – an indicator of inflation – fell to their lowest level on a Y/Y basis since June 2021.

“This morning’s jobs report was so strong that the Fed Funds rate curve started to price in the odds of a hike this year. While the increased probability is miniscule, the significant shift in expectations is hard to ignore, as investors are responding to consistently hot data amidst heightening geopolitical tensions,” José Torres, senior economist at Interactive Brokers (IBKR), said.

“Levels of hiring, wages, and unemployment in March were sturdy and hardly consistent with a central bank that should be cutting. The likely result is that we’ll see increasing dissidence among Fed members opposing rate cuts with certain policymakers already pushing back against Chair Powell’s obsession with monetary policy accommodation,” Torres added.

Though the labor market data and monetary policy largely dominated headlines this week, there were also some notable developments related to companies: Tesla (TSLA) stunned investors with a quarterly deliveries report that came in lower than already-revised expectations; chip giant Intel (INTC) disclosed a hefty annual loss for its foundry business; and media and entertainment giant Walt Disney (DIS) fought off two board challenges from activist investor Nelson Peltz and his Trian Fund and Blackwells Capital.

Turning to the weekly performance of the S&P 500 (SP500) sectors, nine of the 11 ended in the red, led by Health Care and Real Estate. Energy and Communication Services were the two gainers. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from March 28 close to April 5 close:

#1: Energy +3.90%, and the Energy Select Sector SPDR ETF (XLE) +3.92%.

#2: Communication Services +2.47%, and the Communication Services Select Sector SPDR Fund (XLC) +1.07%.

#3: Materials -0.14%, and the Materials Select Sector SPDR ETF (XLB) -0.13%.

#4: Industrials -0.24%, and the Industrial Select Sector SPDR ETF (XLI) -0.23%.

#5: Utilities -0.74%, and the Utilities Select Sector SPDR ETF (XLU) -0.75%.

#6: Information Technology -1.00%, and the Technology Select Sector SPDR ETF (XLK) -0.87%.

#7: Financials -1.43%, and the Financial Select Sector SPDR ETF (XLF) -1.31%.

#8: Consumer Discretionary -1.88%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -2.75%.

#9: Consumer Staples -2.67%, and the Consumer Staples Select Sector SPDR ETF (XLP) -2.66%.

#10: Real Estate -2.95%, and the Real Estate Select Sector SPDR ETF (XLRE) -2.91%.

#11: Health Care -3.07%, and the Health Care Select Sector SPDR ETF (XLV) -3.05%.

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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