Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities moved mostly higher last week despite mixed economic & earnings data.
- S&P 500 +0.65% Dow +2.08% Russell 2000 +1.53%, Nasdaq -0.57%
- The All-Country World Index was flat at +0.04%.1
- S&P 500 sub-sectors were mostly higher last week.
- Healthcare, Financials, & Energy led to the upside with gains over 2.95%.1
- Real Estate & Consumer Discretionary were the only negative sectors.
- The CBOE Volatility Index (VIX) limped higher by 1.80% to end at 13.58. 1
- S&P 500 +0.65% Dow +2.08% Russell 2000 +1.53%, Nasdaq -0.57%
- US Treasury bond yields were little changed last week as all eyes are on the Fed meeting this week.
- US 2yr +0.08% at 4.82%, 10yr +0.01% to 3.84%, 30yr -0.02% to 3.91%.1
- While a rate hike is expected this week, forward guidance will be key to the markets response.
- Commodities as an aggregate asset class were higher last week.
- WTI Crude rose +1.80%.1
- Gold increased +0.34%.1
- The US Dollar index gained +1.17%.1
- In our opinion, U.S. economic data continued to be mixed last week.
- US retail sales for June came in below expectations. 1
- US jobless claims fell to a 2-month low in the latest data release. 1
- Regional manufacturing surveys showed continued stagnation. 1
- An index of equities outside the US (FTSE All-World ex-US) declined -0.23%.1
Conclusion
- US Equities rose mostly higher last week, led by the Dow Jones Industrial Average.
- The Nasdaq was the only negative major index last week as earnings from Tesla & Netflix dragged it down.
- Despite the move lower, the Nasdaq has been pacing major indices higher all year despite higher interest rates.
- Growth oriented stocks are highly sensitive to interest rates, which are used to calculate what earnings in the years ahead are worth right now.
- What started as a bear-market rally driven entirely by a few mega-cap technology companies could be morphing into a broad-based rally fueled by fading recession fears.
- This would add more asset classes to the list that are ignoring the alarm bells from the bond market.
- The Nasdaq was the only negative major index last week as earnings from Tesla & Netflix dragged it down.
- S&P 500 subsectors were mostly higher last week.
- The year-to-date underperformers led to the upside as glimpses of rotation showed up.
- Energy & Healthcare, still negative so far in ’23, led to the upside. 1
- Financials were a close 3rd on the week as earnings from the beleaguered sector came in better than expected. 1
- Real Estate & Consumer Discretionary were the negative sectors. 1
- Discretionary was hampered by poor earnings from a couple big names mentioned above & retail sales disappointing analyst expectations.
- The year-to-date underperformers led to the upside as glimpses of rotation showed up.
- The US Treasury market was little changed last week as yields have compressed in recent weeks.
- The calm seemed to be more waiting for the deluge of rate sensitive data this week as the Federal Reserve, Bank of Japan, & European Central Bank all meet this week.
- Expectations are all but priced in for the Fed to hike rates this week while the unknown is from the Bank of Japan’s yield control policies.
- Any changes to the BOJ’s current operating structure could send a tsunami throughout the global asset markets.
- Expectations are all but priced in for the Fed to hike rates this week while the unknown is from the Bank of Japan’s yield control policies.
- The market is pricing in less than a 30% chance of any additional rate hikes beyond this month. 1
- If inflation is sticky & the Fed keeps rates higher for longer, most market strategists are not prepared or positioned for this.
- While the threat of a recession is for the most part priced out of the markets, the risk still exists at a time when bankruptcy filings are starting to pile up.
- The calm seemed to be more waiting for the deluge of rate sensitive data this week as the Federal Reserve, Bank of Japan, & European Central Bank all meet this week.
- While earnings season has started without a clear direction, 170 of the 500 companies in the S&P 500 index report this week. 1
- Of bigger importance is the release from mega-cap bellwethers Microsoft, Meta, & Google.
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- Any shakiness in their reports will undoubtedly send waves throughout the capital markets following earnings expectations being raised by Wall Street analysts.
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 7/21/2023
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