Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities ended the week lower as a spike in volatility & interest rates seemed to weigh on investors.
- S&P 500 -1.05% Dow -0.17%, Russell 2000 -3.39%, Nasdaq -2.41%1
- The All-Country World Index declined -1.44%.1
- S&P 500 sub-sectors were all lower outside of Energy.
- Energy was the sole positive sector with a gain of almost 5%.1
- Consumer Discretionary & Real Estate led to the downside with losses over 2%.1
- The CBOE Volatility Index (VIX) gained 12% to finish above the 20 level. 1
- S&P 500 -1.05% Dow -0.17%, Russell 2000 -3.39%, Nasdaq -2.41%1
- US Treasury bond yields moved higher last week across the maturity curve.
- US 2yr +0.20% at 4.50%, 10yr +0.21% to 3.74%, 30yr +0.20% to 3.83%.1
- Comments from Fed officials & economic data surprises seemed to reignite inflation fears.
- Commodities as an aggregate asset class were higher last week.
- WTI Crude rose +8.65%.1
- Gold was flat on the week.
- The US Dollar index rose +0.63%.1
- In our opinion, U.S. economic data was mixed last week.
- US exports fell in the latest release as global economic activity slowed. 1
- Consumer sentiment increased slightly in February. 1
- Consumer credit rose by the smallest amount in 2 years in its latest release. 1
- An index of equities outside the US (FTSE All-World ex-US) declined by 1.14%.1
Conclusion
- US Equities ended the week lower as the recent bounce higher in equities seems to have become exhausted by fresh inflation concerns.
- The Dow Jones Industrial Average was the best performer at -0.17%.1
- The small-cap tracking Russell 2000 led to the downside with a loss over 3.3%.1
- All eyes are on fresh Consumer Price Index inflation data this Tuesday.
- Many are anticipating the CPI report to show prices not moderating the way the Federal Reserve would like to see.
- A surprising rise in gas & used-car prices last month1 may interrupt the several months long trend of declining inflation.
- Investors increased their hedges last week causing a double digit spike in the VIX volatility index. 1
- Trading days were exceptionally turbulent last year when CPI data was released with the S&P 500 falling in 7 of the 12 days. 1
- Over the past 6 months, the S&P 500 has seen as average move of 2.6% in either direction on CPI day which is the highest since 2009. 1
- Many are anticipating the CPI report to show prices not moderating the way the Federal Reserve would like to see.
- S&P 500 sub-sectors were lower last week.
- Energy was the sole gaining sector on the back of Russia responding with decreased output and comments from Saudi’s oil minister backing not increasing supply by OPEC+.
- US Treasury yields moved higher as the 2/10 yield curve stayed extremely inverted.
- The US Treasury benchmark lost 1.25% last week, its worst in 3 months. 1
- A reversal in the consumer price index trend could empower the Fed to keep raising rates while keeping them higher for longer to achieve price stability.
- This would dash the hopes that have been driving equities & bonds higher in ’23.
- With 70% of S&P 500 companies having reported earnings, the takeaway is pretty clear that the 2-year run of swelling corporate profits is over.
- The year over year blended earnings decline thus far is -4.9%1 with the biggest technology companies that once seemed shielded from negativity also feeling the effects of slowing demand and a weaker digital-advertising market.
- Collectively, Meta Platforms Inc., Apple, Amazon.com Inc., Microsoft Corp., and Alphabet missed consensus earnings estimates by 8%.1
- Big tech stocks have rallied amid rising expectations for a soft economic landing, optimism on China’s reopening, and an investor rotation back into stocks that were hit the hardest last year.
- While 69% of companies have still been able to beat lowered analyst expectations, the share of those delivering negative surprises rose to the highest level since the onset of Covid. 1
- Profit margins have remained under pressure across industries with companies forced to grapple with inflation, a tight labor supply, and waning pricing power.
- While the job market has remained surprisingly resilient so far in the face of the Fed’s rate hikes, many companies are moving rapidly to cut their workforces in anticipation of a deeper slowdown.
- The year over year blended earnings decline thus far is -4.9%1 with the biggest technology companies that once seemed shielded from negativity also feeling the effects of slowing demand and a weaker digital-advertising market.
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 2/10/2023
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