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Stocks closed mixed on Friday, and mostly lower for the week. The Dow and the mid-cap S&P 400 were up on Friday with moderate gains. The small-cap Russell 2000 was unchanged. But the S&P 500 and tech-heavy Nasdaq were lower with the Nasdaq droppi
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks End Mixed On Friday, And Mostly Lower Last Week, Earnings And Inflation Reports On Deck For This Week

Stocks closed mixed on Friday, and mostly lower for the week.

The Dow and the mid-cap S&P 400 were up on Friday with moderate gains. The small-cap Russell 2000 was unchanged. But the S&P 500 and tech-heavy Nasdaq were lower with the Nasdaq dropping more than -2% on the day.

For the week, only the Dow eked out a small gain, while everything else was lower, making it 3 down weeks in a row for the small-caps, mid-caps and the S&P 500, and 4 down weeks in a row for the Nasdaq.

From their all-time high closes last month, the Dow is down by -4.57%, the S&P is down by -5.46%, and the Nasdaq is down by -7.06%. The small and mid-caps (from their recent high closes) are down by -5.61% and -6.88% respectively.

So most of the indexes are in pullback territory, defined as a decline between -5% and -9.99%.

But it should be known that pullbacks are quite common. Every bull market has them. In fact, stocks usually pull back about -5% roughly 3-4 times per year.

And pauses like these help refresh and strengthen the market before their next leg up.

While pullbacks and corrections (corrections are defined as a decline between -10% and -19.99%, and occur on average of about once a year) are never fun when they're happening, if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell.

Slowing disinflation per the latest CPI and PPI inflation reports sees the Fed pushing out their timeline for rate cuts. While some Fed watchers are beginning to speculate that we could see no rate cuts until 2025, the Fed is still forecasting 3 rate cuts this year (presumably by 25 basis points each).

At present, Fed Funds traders have the best and earliest odds of 64.5% for a rate cut in September. Everything before that is less than 50% with the next FOMC announcement on May 1 at only 3.2% for a rate cut.

Concerns over the potential for escalating geopolitical tensions (Russia/Ukraine war, Hamas/Israel war, and now Iran/Israel conflict) sent stocks lower late last week. Cooling tensions between Iran and Israel should calm the equities market. But oil is being bid up, and was already on the rise before the latest altercation.

Gladly, earnings season kicks into gear this week. And that's great news since stocks typically go up during earnings season.

This week we'll hear from 933 companies, including marquee names like Verizon and Ameriprise Financial today; Tesla, Visa and Texas Instruments tomorrow; Meta, IBM and ServiceNow on Wednesday; Microsoft, Alphabet and Intel on Thursday; and Exxon Mobile, Chevron and AbbVie on Friday, amongst many others.

While it'll be a relatively slow day for economic reports today, the calendar gets busier as the week goes on, culminating on Friday with another look at inflation per the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge.

And we'll see if the recent pullback has run its course, and if the market is ready to head back up.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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