Wall Street Struggles For Direction

U.S. stock markets closed out the week on a mixed note, as investors weighed quarterly results from banks against a backdrop of worries about recession and inflation. Thursday's data release showed that continuing jobless claims jumped to their highest level since November 2021, suggesting a potential softening labor market. The benchmark S&P 500 edged down 0.10% week-over-week while the Dow Jones Industrial Average fell 0.23%. The Nasdaq Composite closed 0.42% lower as big tech continued to stutter ahead of a big earnings week. At the same time, the Cboe Volatility Index, Wall Street’s fear gauge, extended its losing streak to five straight weeks, dropping below the 17 threshold and reaching the lowest level in more than seventeen months.

In contrast, European stock indexes ended the week in positive territory, with the MSCI EMU gaining 0.31% and the CAC 40 hitting another record high at 7,577 on Friday, up 0.76% for the week. The positive momentum was driven by the luxury goods sector, with LVMH and Hermès International both setting new record highs of €901.10 and €2,003.50 respectively. Meanwhile, the FTSE also saw gains, rising by 0.54% for the week. Inflation figures in the UK remained elevated, with the Consumer Prices Index (CPI) rising by 10.1% in the 12 months to March 2023. It was slightly lower than the prior month's figure of 10.4%.

In Asia, Japan’s Nikkei 225 index rose 0.25% despite a downturn in business sentiment among major manufacturers due to sluggish overseas demand. China’s Shanghai Composite index fell 1.11%, as initial enthusiasm from better-than-expected first-quarter GDP data appeared to have run out of steam. While the data did suggest that the country's economic recovery was on track, persistent weaknesses in the manufacturing sector raise concerns about the sustainability of the rebound.

Defensive sectors hold up    

Globally, defensive stocks, including consumer staples (up 1.68% for the week, best performer among the S&P sectors) and utilities (up 1.09%) managed to limit the broader market declines.

The consumer discretionary sector ended the week in the green despite weakness in Tesla stocks (TSLA). They dropped 10.77% after the electric-vehicle maker's sixth price cut this year in the United States. On the flip side, Amazon stocks (AMZN) rebounded strongly (+4.34% for the week) in the wake of a bullish call from JPMorgan ahead of the e-commerce giant's Q1 earnings report.

By contrast, communication services plunged 3.05%, weighed down by Meta (-3.88%), Alphabet-Google (-3.24%), and Netflix (-3.15%). Netflix stocks took a nosedive after the video-streaming pioneer issued a downbeat forecast. It was also a tough week for the energy sector, down 2.54%, as oil prices fell significantly (WTI crude oil down 5.63%), snapping a four-week winning streak. Yet data showed U.S. weekly inventories fell much more than expected last week. Investors fear that a stalling U.S. economy may hit crude oil demand from the world’s largest consumer.