Chicago: 312-580-0900 | Suburban: 847-831-8831 | Family Office: 312-338-7788 | Financial Planning: 312-440-5028 | Benefits: 847-831-8831

Kuby’s Commentary

Enter the Correction

Apr 22, 2024

Last Week

The stock market remained under pressure, with the S&P 500 extending its losing streak to six consecutive trading days on Friday while posting its worst weekly performance in over a year. The decline moved the index into correction territory, down over 5% since the record high set at the end of March and below the critical 5,000-point level for the first time since late February. The retreat was driven by a robust March retail sales report, leading to another encore of the “higher for longer” hawkish Fedspeak chorus. Geopolitical concerns over Israel and Iran added to the risk-off mood and a bumpy start to the first quarter corporate earnings season. The Tech sector fared the worst following disappointing results from Dutch semiconductor equipment maker ASML and the world’s largest contract chipmaker, Taiwan Semiconductor.

The earnings growth rate for the first quarter is 0.5% today, compared to an earnings growth rate of 0.9% last week and an earnings growth rate of 3.4% at the end of the first quarter (March 31). Downward revisions in the Health Care sector from -7.1% to -30.8% have been the most significant contributors to the decrease in the earnings growth rate, specifically from Bristol-Myers Squibb and Gilead Sciences. In both cases, those revisions were related to accounting for acquisitions rather than actual business results.

The Financials sector has provided the most significant positive contributors to earnings for the index, with the blended earnings growth rate for the Financials sector increasing to 5.1% from 1.7%. Bargains abound in both large and small-cap financials, with Bank of America, JPMorgan Chase, Bar Harbor Bankshares, and Westwood Holdings Group as some of our favorite individual holdings and XLF, KBE, and KRE as interesting ETFs. The banking industry is well-capitalized and reserved for rising commercial real estate loan losses, as highly publicized throughout the last year or two. The banks that have reported 1Q24 results already have indicated they have reserved for between 5% and 10% of office real estate loans to default. Some further Net Interest Margin, or ‘NIM,’ compression also seems factored into valuations. Our constructive view seems warranted in select names recently raising their dividends, including JPMorgan Chase and Bar Harbor Bankshares.

Adding up the damage for the week, the S&P 500 dropped 3.1%, the Nasdaq Composite lost 5.5%, and the Russell 2000 shed 2.8%. Declining issues outnumbered advancing issues by a factor of more than 2-1, while only the Telecom and Utilities sectors were able to finish modestly in the green. It was rough for bond investors, as the yield on both the 2-year and the 10-year Treasury increased approximately 11 basis points to 4.96% and 4.61%, respectively. The gold price was resilient, rising 1.3% for the week.

More damage was done to Chicago sports fans’ psyches, as the Bulls’ season ended with a whimper in Miami, a 21-point loss to the Heat, who were playing without their superstar Jimmy Butler.

This Week

During the upcoming week, 158 S&P 500 companies are scheduled to report results for the first quarter, including three of the “Magnificent 7”: Meta Platforms, Microsoft, and Alphabet. Whereas we are wary of the high multiples on those popular stocks, five of the “Magnificent 7” companies are expected to report year-over-year earnings growth of 64.3% for the first quarter. Excluding these five companies, the blended earnings decline for the remaining 495 companies in the S&P 500 would be -6.0% for the quarter versus the 0.5% when those five are included.

The Energy sector could also be in focus, as Exxon Mobil and Chevron are scheduled to report earnings on Friday. Despite a slight year-over-year increase in the average price of oil, the volatile Energy sector is expected to report a decline of -25.6% in earnings, but with a rebound in the following quarter.

The most significant economic data report will also come on Friday when the BEA will release the personal consumption expenditure price index for March. Economists forecast a 2.6% year-over-year increase and a 2.7% advance in the core PCE, which excludes food and energy prices. The market has been susceptible to inflation data, so any minor variance from the consensus would likely move markets.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

Sign up to receive a weekly email with Kuby’s Commentary.

    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

    Recent Kuby’s Commentaries
    Kuby’s Commentary & Quarterly Update Archives