Closing Market Update

S&P 500 Extends Nosedive on Geopolitical Worries

April 19, 2024 Joe Mazzola
The S&P 500 index dropped for a sixth straight trading day after Israel launched an attack on Iran and reduced rate cut hopes kept investors in a foul mood.

Published as of: April 19, 2024, 4:40 p.m. ET 

Audio Schwab Market Update

Listen to the latest audio Schwab Market Update. Or listen and subscribe for free to the end-of-day Schwab Market Update podcast in your podcast app of choice.

(Friday market close) Heightened geopolitical concerns and deflated hopes for lower interest rates kept the S&P 500® index (SPX) under pressure, pushing the benchmark below 5,000 to a sixth consecutive decline, its weakest stretch in 18 months. The Nasdaq Composite® ($COMP) also fell a sixth-straight day and ended at a three-month low.

The Dow Jones Industrial Average® ($DJI) bucked the weakness in other benchmarks and posted a modest gain behind a rally in American Express (AXP).

Stocks began the day under pressure after Israel's overnight strike on Iran triggered a sharp upswing in WTI Crude Oil (/CL) futures. The strike appeared to be limited, and oil prices faded from the initial rally, which did little to alter a market mood soured by resurgent inflation that likely will keep the Federal Reserve from cutting rates any time soon.

Netflix (NFLX) sank 9.1% after stronger-than-expected quarterly earnings were overshadowed by softer-than-expected revenue guidance and the streamer's announcement that it will stop reporting quarterly membership numbers starting next year.

According to Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research, the stock market has been undergoing a "shift in the bullish narrative" over the past month.

Earlier in the year, investors seized on a "U.S. economy is strong, disinflationary trends are intact, and the Fed will cut rates" storyline, Peterson said. More recently, the story took a detour to "the U.S. economy is stronger-than-expected, leading to stickier inflation and therefore significantly diminished expectations around rate cuts in 2024."

"The primary factors hitting stocks this week were higher rates, driven by strong economic data and hawkish commentary from Fed Chair Jerome Powell, along with recent bearish technical momentum," he added.

Here's where the major benchmarks ended:

  • The S&P 500 index fell 43.89 points (0.9%) to 4,967.23, down 3% for the week; the Dow Jones Industrial Average gained 211.02 points (0.6%) to 37,986.40, little changed for the week; the Nasdaq Composite lost 319.49 points (2.1%) to 15,282.01, down 5.5% for the week.
  • The 10-year Treasury note yield (TNX) dropped more than 2 basis points to 4.623%, still up about 10 basis points for the week.
  • The Cboe Volatility Index® (VIX) rose 0.71 to 18.71.

Nvidia (NVDA) plunged 10% to lead the chip sector lower, sending the Philadelphia Semiconductor Index (SOX) down 4.1% to a two-and-a-half-month low. Communication Services shares were also among the weakest sectors, fueled by Netflix weakness. There were several pockets of strength, however. Banking shares posted firm gains Friday behind stronger-than-expected quarterly results from some regional lenders. Utilities also advanced.

The S&P 500 has fallen 5.5% from a record close March 28, more than halfway to the 10% threshold that's traditionally viewed as a correction. The Nasdaq Composite is down 7.1% from a record close on April 11.

Read all our market commentary on our Insights & Education page, and you can follow us at @SchwabResearch.

Read all our market commentary on our Insights & Education page, and you can follow us at @SchwabResearch.

Stocks on the move

The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

  • American Express soared 6.2%, leading Dow gainers, after the credit card issuer reported first-quarter earnings and revenue that surpassed analysts' expectations. 
  • Fifth Third Bancorp (FITB) jumped 5.9% after the bank reported better-than-expected first-quarter results.
  • Paramount Global (PARA) surged more than 13% following media reports that Sony Pictures Entertainment and Apollo Global Management have been in talks over a joint bid to acquire the company.
  • PPG Industries (PPG) sank 3.1% after the materials company's quarterly revenue disappointed investors. 
  • Schlumberger (SLB) dropped 2.1% even after the oilfield services company's first-quarter revenue exceeded expectations. 
  • Ulta Beauty (ULTA) fell 2.7% after Jefferies downgraded the beauty retailer to "hold" from "buy," citing rising competition.

Next week's earnings calendar features expected quarterly results from several major technology companies, including Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT). Analysts have set a high bar in terms of expectations for earnings per share and revenue, partly because of the expanding market for artificial intelligence. 

A few major semiconductor companies are also on the earnings calendar next week, including Intel (INTC) and Texas Instruments (TXN). Monday brings expected results from business software provider SAP (SAP), along with steelmaker Nucor (NUE), regional bank Truist Financial (TFC), and wireless giant Verizon Communications (VZ). Tesla (TSLA) is expected to report results Tuesday.

Fed sets tone: Higher for longer

Going into this week, investors had already scaled back expectations for Fed rate cuts after March's Consumer Price Index (CPI) surpassed expectations for the third consecutive month. On Tuesday, Fed Chair Powell signaled rates will remain historically high until the central bank is convinced inflation is closer to its 2% long-term target.

"More recent data shows solid growth and continued strength in the labor market but also a lack of further progress so far this year on returning to our 2% inflation goal," Powell said Tuesday at an economic conference. "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."

Many analysts now believe any initial rate cuts may happen in July or September at the soonest. Some suspect the Fed may not lower rates at all this year.

"The tone is set," said Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research, referring to Fed rate policy. "Higher-for-longer is here to stay for the time being. Sticky inflation should keep the federal funds rate elevated until there's evidence the disinflationary trend resumes."

Late Friday, traders priced near-100% odds the fed funds target will remain unchanged at 5.25% to 5.5% following the Federal Open Market Committee's (FOMC) meeting April 30 – May 1, according to the CME FedWatch Tool

The tool shows an 81% chance the rate will be held unchanged following the FOMC's June 11 – 12 meeting and 56% odds for no change after its July meeting.

The recent inflation uptick should make next week's Personal Consumption Expenditures (PCE) price report of keen interest. PCE is the Fed's favorite inflation indicator, and it's been running slightly cooler than CPI. The March PCE report is scheduled for next Friday.

Before PCE, the government is expected to release its first estimate for first-quarter gross domestic product (GDP). Market estimates have been climbing for weeks based on robust economic data, playing into expectations that the Fed could wait longer to cut rates. The Atlanta Fed's GDPNow model now pegs GDP to grow at a seasonally adjusted annual rate of 2.9%, not much below the final fourth-quarter reading of 3.4%.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab & Co., Inc.

Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results, and the opinions presented cannot be viewed as an indicator of future performance.

Investing involves risk, including loss of principal.

Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

Indexes are unmanaged, do not incur management fees, costs, and expenses and cannot be invested in directly. For more information on indexes, please see ​

The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the Options Disclosure Document titled "Characteristics and Risks of Standardized Options" before considering any option transaction.

Supporting documentation for any claims or statistical information is available upon request.