Stocks End Lower, More Earnings On Tap The Dow and the S&P started in the green, but within the hour turned negative. They all put in their worst levels of the day in the early afternoon. The Dow and S&P staged a rally late in the session, and actually got back into positive territory. But it was short-lived as they fell back into the red. Tuesday's comments by Fed Chair Jerome Powell suggesting it may take longer than expected before they begin cutting rates continued to weigh on shares. Odds had already shifted towards the first rate cut beginning in September rather than June or July even before his comments. But his comments were the most explicit he's been regarding a pushed out timeline when he said "the recent data have clearly not given us greater confidence, and instead indicate that it's likely to take longer than expected to achieve that confidence" in seeing inflation returning to their 2% target. One could argue that the economy is strong enough right now where rate cuts are not 'needed' at the moment. But the other argument is that the longer the wait on cuts, the greater the risk that something could break, thus ending the so-called soft landing we're experiencing. But at the moment, a slowing economy does not seem to be a concern.
In fact, on Tuesday, the International Monetary Fund (IMF) raised their global growth forecast to 3.2%, up from January's forecast of 3.1%. And they gave the U.S. the biggest upside revision, going from 2.1% per their January forecast to 2.7% now. And Mr. Powell seconded that by saying "more recent data shows solid growth and continued strength in the labor market." In other news, yesterday's MBA Mortgage Applications rose 3.3% w/w with purchases up 5.0%, and refi's up 0.5%. The Atlanta Fed Business Inflation Expectations came in at 2.3% y/y vs. last month's 2.4% pace. And the Beige Book report showed the economy expanded with 10 out of 12 districts experiencing slight or modest growth, up from 8 districts in the previous report. Although, consumer spending barely increased and was mixed across districts and spending categories. Today we'll get Weekly Jobless Claims, the Philadelphia Fed Manufacturing Index, Existing Home Sales, and Leading Indicators. We'll also get more earnings. Today we'll hear from 78 companies with Genuine Parts, D.R. Horton, and the Blackstone Group going before the open, and Taiwan Semiconductor, Netflix, and Intuitive Surgical posting after the close. The S&P has now pulled back by -4.42% from their all-time high close, very close to that -5% pullback mark. As painful as this pullback is, they are very common. Every bull market has them. In fact, stocks usually pull back roughly 3-4 times per year. And corrections take place on average of about once a year. For reference, a 'pullback' is defined as a decline between -5% and -9.99%. A 'correction' is a decline between -10% and -19.99%.
I point this out because if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell. With 2 trading days left, there's still time to turn things around this week. But whether we do or we don't, with earnings season underway (stocks typically go up during earnings season), a resilient economy, and the pullback quite possibly nearing its end, we could be looking at a rebound very soon. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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