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Market Recap
WEEK OF OCT. 23 THROUGH OCT. 27, 2023
The S&P 500 fell 2.5% last week, sending the index into correction territory as a broad decline led by communication services and energy sent the benchmark more than 10% below its July 31 closing high. The market benchmark ended Friday's session at 4,117.37, down from last Friday's closing level of 4,224.16. With this marking a drop of more than 10% from the S&P 500's July 31 closing high of 4,588.96, it establishes the start of what market watchers call a correction.
This also marks the S&P 500's second weekly drop in a row. With just two sessions remaining in the month, the index is now down nearly 4% in October. The index is still solidly in positive territory for 2023, though the year-to-date increase has been pared significantly and is up 7.2% for the year.
The week's decline came as investors were concerned by the latest round of quarterly earnings results. Some reports came in below expectations while a number of others that beat expectations contained guidance reductions and warnings for the months ahead.
Economic data showed the US economy grew at a stronger-than-projected pace in the third quarter, helped in part by an acceleration in consumer spending. However, investors are worrying that this could mark a peak in growth as they fear the amount of consumer spending seen in Q3 is unsustainable.
By sector, communication services had the largest percentage drop, falling 6.3% for the week, followed by a 6.2% decline in energy, a 3.9% slip in health care, a 2.4% decline in financials and a 2.3% drop in industrials. Utilities, the lone gainer, edged up 1.2%.
The drop in communication services was led by shares of Alphabet (GOOG), which tumbled 9.8% on the week as the Google parent reported an annual growth slowdown in its cloud business for the third quarter. While Alphabet's overall Q3 results topped expectations, investors were concerned by the slowdown in the cloud business.
Also weighing on communication services, shares of Meta Platforms (META) fell 3.9% despite the Facebook parent reporting higher-than-expected Q3 earnings and revenue, as the company also warned of weaker advertising demand in the current quarter.
The energy sector's drop came as crude oil futures also fell on a weekly basis. The decliners included shares of Chevron (CVX), which shed 13% on the week as the oil company reported Q3 adjusted earnings per share below analysts' expectations despite higher-than-expected revenue.
On the upside, the gainers in utilities included NextEra Energy (NEE), whose shares rose 8.2% as the company reported Q3 adjusted earnings per share above analysts' mean estimate despite revenue coming in slightly below the Street view.
This week's earnings calendar features McDonald's Corp. (MCD), Pfizer Inc. (PFE), Advanced Micro Devices Inc. (AMD), Caterpillar Inc. (CAT), Apple Inc. (AAPL), Eli Lilly & Co. (LLY), and Berkshire Hathaway (BRK.A, BRK.B).
October employment numbers will be in focus on the economic front, with the ADP employment report for October expected on Wednesday and the Labor Department's October nonfarm payrolls and unemployment rate due on Friday.
