Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

Data

  • U.S. equities fell for a 3rd straight week as economic data continued to cause caution from participants.
    • S&P 500 -0.17% Dow +0.86%, Russell 2000 -0.12%, Nasdaq -1.93%1
      • The All-Country World Index declined -0.08%.1
    • S&P 500 sub-sectors ended the week mixed.
      • Energy led to the upside with a gain of 4.4%.1
      • Consumer Discretionary & Tech led to the downside with losses over 2%.1
    • The CBOE Volatility Index (VIX) declined slightly, staying above the 20 level.
  • US Treasury bond yields moved higher last week.
    • US 2yr +0.14% at 4.31%, 10yr +0.27% to 3.75%, 30yr +0.29% to 3.82%.1
    • Yields reversed their recent trend as inflationary pressures & labor market tightness persisted.
  • Commodities as an aggregate asset class were mixed last week.
    • WTI Crude rose over 6%.1
    • Gold was down slightly.
    • The US Dollar index was lower.
  • In our opinion, U.S. economic data was mixed last week.
    • The Fed’s preferred PCE inflation gauge came in at a 5.5% increase over the last year. 1
    • The final 3rd quarter GDP figure was revised higher. 1
    • Durable goods orders sank over 2% in November on weakening demand. 1
  • An index of equities outside the US (FTSE All-World ex-US) gained 0.38%.1

Conclusion

  • US Equities were mostly lower last week as economic data continued to point market participants to continued Federal Reserve tightening.
    • The Dow Jones Industrial Average led major indices with gain, helped by Energy. 1
    • The tech & growth oriented areas of the market led to the downside as the Nasdaq lost 2%.
      • Reminder that higher interest rates hurt growth co’s the most as their future earnings are discounted against the risk-free rate.
    • Equities remain in a near-term consolidation pattern following the December option expiration and the large amount of short-term institutional hedging going on in the background.
      • As a result of this and holiday trading dynamics, we anticipate a very tight trading range for the next week or so.
  • S&P 500 sub-sectors were extremely mixed
    • Energy led to the upside by a wide margin on the back of crude oil shooting higher.
      • A weakening US Dollar, China reopening policy & threatened supply cuts by Russia seemed to guide black gold higher.
    • Utilities, Financials, & Consumer Staples also all rose over 1%.1
    • Consumer Discretionary & Tech led sectors lower as the growth factor came under pressure as a result of yields shooting higher last week.
  • Non-US equities moved higher last week, outperforming domestic shares.
    • China continues to loosen Covid policies.
    • The US Dollar weakening has provided a tailwind to non-US markets.
    • The Bank of Japan shocked markets by tightening their monetary policy by backing off their yield controls on their domestic bond market. 1
      • If this is the start of them backing away from their ultra-loose monetary policy, major global shifts could follow.
  • US Treasury yields shot higher last week on the back of economic data that continued to point to the Fed lifting rates further and inflation being stickier than many anticipated.
    • The longer dated maturities led the rise in yields last week and the inverted yield curve weakened slightly. 1
    • Economic data put more pressure on market participants that had been pricing in a quick pivot by the Fed. o The Fed’s preferred inflation measure came in below last month but the PCE gauge is still up 5.5% over the last 12 months. 1
      • This is a long way from the Fed’s 2% target.
    • Elevated consumer spending, wage growth, & the tight labor market will keep pressure on inflation figures.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net 

 1 Source: Bloomberg – 12/23/2022  

Disclosures: The information provided in this paper is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal or tax advice. Capital Investment Advisory Services, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of or reliance on the information. This information is subject to change and, although based on information that Capital Investment Advisory Services, LLC considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers. For investment related terms definitions, please visit: www.investopedia.com Past performance is no guarantee of future results. Additional information about CIAS and its Form ADV Part 2A are available on the SEC’s website at www.adviserinfo.sec.gov Advisory services through Capital Investment Advisory Services, LLC Securities may be offered through Capital Investment Group, Inc. Member FINRA/SIPC Both firms located at 100 E. Six Forks Rd. Suite 200, Raleigh, NC 27609 919-831-2370