Stocks Stumble as Consecutive Weekly Losses Fuel Speculation on Market Direction

Investor attention is shifts to the upcoming Fed meeting and corporate earnings as the market continues to face uncertainty.

• Market faces first consecutive weekly losses, prompting speculation on sentiment shift and profit-taking.

• High-flying stocks retreat, but Nvidia's GTC conference and AI developments drive optimism.

• Federal Reserve's meeting and earnings reports from FedEx, Lululemon, and Nike dominate investor focus.

Stocks faced consecutive weekly declines, marking a first for the year, with the S&P 500 slipping by 0.72% on Friday, closely trailed by the Nasdaq Composite's decline of just under 1%.

Both indices hovered near their respective 21-day moving averages. The upcoming week promises pivotal events, including meetings of the Bank of Japan, Bank of England, and the Federal Reserve, alongside a flurry of earnings reports.

This convergence of factors prompts speculation about whether recent weeks reflect mere profit-taking or signal a broader shift in market sentiment.

Friday, characterized by quadruple witching, witnessed a lower close, yet market internals exhibited surprising positivity. Advancers outpaced declines, with overall positive volume outweighing the negative. Notably, the VIX remained relatively unchanged.

The downturn predominantly affected prominent market players, with notable declines seen in high-flying stocks. ARM Holdings, for instance, retreated by 23% from its recent peak in February, while Marathon Digital witnessed a substantial 45% drop from its late February highs. Similarly, Tesla's shares stumbled by 34% year-to-date.

Contrastingly, Nvidia stands out, with its annual GTC conference underway. Typically, a forum for significant announcements, the market anticipates a 9% potential move for the week, reflecting Nvidia's robust performance. Since the close of last year, Nvidia's shares have surged an impressive 77%.

In the realm of Artificial Intelligence (AI), discussions between Apple and Google regarding the potential utilization of Google's Gemini AI engine in the iPhone intrigue observers. While details remain scant ahead of the Apple Developer's Conference this summer, the development raises questions about Apple's AI strategy.

The highlight of the week, however, is the Federal Reserve Open Market Committee (FOMC) meeting, slated for Tuesday and Wednesday. While the Fed is expected to maintain interest rates unchanged this month, all eyes are on Jerome Powell's forward guidance. Speculation swirls around the number of anticipated rate cuts, with current projections suggesting no rate adjustments until at least June.

Additionally, investors await earnings reports from FedEx, Lululemon, and Nike on Thursday. While FedEx's performance remains steady for the year, Lululemon and Nike have experienced declines of 9% and 8%, respectively.

Looking ahead to today, premarket indicators point to a strong start, with S&P 500 futures up 0.7% and Nasdaq 100 futures climbing by 1.11%. The Bank of Japan's interest rate decision post-market close garners attention, particularly amid prospects of the first rate hike since 2007.

As market dynamics evolve, adherence to long-term investment plans remains prudent.

JJ Kinahan is CEO of IG North America—which includes tasty live, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan

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