Equities Struggle With Higher Costs

Major equity indexes ended the first four months of the year in negative territory. The S&P 500 Index fell 13.3%, the Dow Jones Industrial Average lost 9.25%, and the Nasdaq was down over 21% for the first four months of the year. The best performing sectors included defensive stocks such as energy, food, and utilities, which include companies providing essential products and services.

Numerous companies are becoming hesitant about passing higher costs along to consumers, concerned that customers might buy from competitors instead. This leads to lower margins for companies which eventually affects earnings, the primary driver of stock prices.

A strong dollar is weighing on U.S. multinational firms whose earnings are negatively impacted as their goods and services become more expensive internationally.

Sources: Fed, Bloomberg, Dow Jones, S&P, Nasdaq

Print Version: Equity Update May 2022

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