Fed in Focus as April Trading Tries To Find Its Footing

The major indexes are headed for weekly losses

Digital Content Manager
Apr 8, 2022 at 12:33 PM
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The first full week of April and the second quarter has settled, with equity markets flying all over the place as investors tried to get a handle on several Federal Reserve updates, as well as worrying signs of an impending recession. Stocks got a promising start on Monday, as investors cycled back into the beaten down tech sector, giving the Nasdaq a boost. The 2- and 10-year Treasury yields remained inverted however, which wound up contributing to the selloff stocks suffered on Tuesday. Comments from U.S. Federal Reserve Governor Lael Brainard also weighed heavily after markets, following the central bank member's suggestion that the Fed shrink its balance sheet "rapidly," to combat rising inflation. 

The highlight of the week, the release of the U.S. Federal Open Market Committee's (FOMC) latest meeting minutes revealed that the Fed would shrink its balance sheet by $95 billion per month. Though a final decision has yet to be made, the news sent stocks to their second day of losses, while the Cboe Market Volatility Index (VIX) and the 10-year Treasury yield both jumped. Volatility and Fed uncertainty followed investors into Thursday's session, though the S&P 500, the Dow, and the Nasdaq all managed notable wins after jobless claims came in at their lowest level since 1968. By midday on Friday, the major indexes continued to explore both sides of their respective breakeven levels, with the Dow and S&P 500 pacing for a daily win, while the Nasdaq cools. All three indexes are headed for weekly losses, however. 

The Best and Worst of April (and the Second Quarter)

With the second quarter and a new month well underway, now might be a good time for investors to consider seasonality before readjusting their portfolios. Luckily, Schaeffer's Senior Quantitative Analyst Rocky White complied a list of the best and worst performers during the month, going back 10 years. Coming out on top, historically, is blue-chip retailer Home Depot (HD), which has been struggling on the charts since its last earnings report. Fellow Dow member Merck (MRK), meanwhile, made White's list of stocks that tend to outperform during Q2. On the other hand, United Airlines (UAL) and Broadcom (AVGO) may want to be avoided this month, as they tend to be seasonal underperformers. 

Stocks That Brushed Off the Broad-Market Selloff

The week wasn't a total disaster, with several standouts bushing off some of the negative price action felt throughout Wall Street. One stock that surprised traders was struggling Canadian pot concern Tilray (TLRY), which blew analysts' earnings expectations out of the water. Meanwhile, Twitter (TWTR) got a huge boost on Monday after Elon Musk took a massive stake in the company (and later joined its board).

There were a few names buoyed by bullish analyst coverage, too, including Generac Holdings (GNRC) and SunPower (SPWR). Meanwhile, a potential regulatory update gave a few U.S.-listed Chinese stocks a lift on Monday, and on Tuesday, Carnival (CCL) brushed off broad-market headwinds after reporting its highest booking week on record. Kroger (KR) also capped off the week with an analyst upgrade, which sent it racing back toward its record highs. 

Holiday-Shortened Week Packed Full of Economic Activity, Bank Earnings

While next week may be short on days, with markets closed on Friday in observance of the Easter holiday, there will be plenty of economic activity for investors to unload. Some of the key indicators traders should look out for are the consumer price index (CPI) for March, as well as manufacturing, retail sales, and business inventories data. Additionally, key expectations from the New York Federal Reserve and the University of Michigan will be due out. Another earnings season will be kicked off by several major bank names, including blue chips Goldman Sachs (GS) and JPMorgan Chase (JPM). Dow member UnitedHealth (UNH) will also have earnings on deck. 

Ahead of the holiday, investors can check out which stocks to target before Easter, as well the stocks to avoid. Plus, Senior V.P. of Research Todd Salamone reveals two charts that might ease some of the anxiety surrounding equities right now. 

 

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