Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities moved mostly lower last week in the holiday shortened trading period.
- S&P 500 -0.05% Dow +0.63%, Russell 2000 -2.53%, Nasdaq -1.10%1
- The All-Country World Index declined -0.11%.1
- S&P 500 sub-sectors were mixed last week.
- Energy, Utilities, & Healthcare led to the upside with gains over 3.88%.1
- Consumer Discretionary & Industrials led to the downside. 1
- The CBOE Volatility Index (VIX) declined last week to end at 18.48. 1
- S&P 500 -0.05% Dow +0.63%, Russell 2000 -2.53%, Nasdaq -1.10%1
- US Treasury bond yields dropped notably last week.
- US 2yr -0.24% at 3.82%, 10yr -0.18% to 3.30%, 30yr -0.20% to 3.54%.1
- The inversion of the 2/10yr has went back to -0.60% from -0.40% just 2 weeks ago. 1
- Commodities as an aggregate asset class moved higher last week led by oil.
- WTI Crude gained 6.29%.1
- Gold rose +1.93%.1
- The US Dollar index declined -0.60%.1
- In our opinion, U.S. economic data was mixed last week.
- The JOLTS index saw job opening drop to their lowest level since May of 2021. 1
- Other job data showed slightly lower numbers but reiterated a strong labor market. 1
- US services data slowed more than expected following recent manufacturing data lower. 1
- An index of equities outside the US (FTSE All-World ex-US) rose +0.34%.1
Conclusion
- US Equities softened a bit as weak volume dominated trading action on the shortened week.
- All major indices were negative last week outside of the Dow Jones Industrial Average which managed to squeak out a small gain thanks to the Energy sector.
- Growth oriented areas of the market led to the downside with the Nasdaq dropping -1.1% and the small-cap tracking Russell 2000 declining over 2.5%.1
- The services sector showing waning demand after months of manufacturing data showing the same seemed to give investors a pause in piling into equities.
- All major indices were negative last week outside of the Dow Jones Industrial Average which managed to squeak out a small gain thanks to the Energy sector.
- US equity sectors were mixed last week.
- Energy spiked over 4% following the unexpected OPEC+ cut to oil production. 1
- If demand continues to soften as a result of a recession, we believe crude & energy equities will come under heavy downward pressure.
- Defensive Utilities & Healthcare were the other leaders to the upside. 1
- Consumer Discretionary led to the downside by a wide margin as any signs of labor market weakness could lead to a reduction in consumer’s spending habits.
- Energy spiked over 4% following the unexpected OPEC+ cut to oil production. 1
- US Treasury yields dropped across the curve last week, led by the 2 year.
- After softening a bit, credit spreads shot higher last week1 indicating continued caution in lending to weaker balance sheet companies.
- Yields were volatile last week as liquidity in the bond market continues to keep the MOVE Index at heightened levels.
- With economic data continuing to point to a decline in activity, the bond market is anticipating the Fed being forced to stop raising interest rates.
- The current odds stand at about a 70% chance of a 0.25% hike in May. 1
- OPEC+’s surprise oil-production cut sent shock waves through financial markets and pushed crude prices up by the most in a year.
- Now that the dust has started to settle, one question looms large: Will that price rally stick, or fade away?
- It could end up being the ultimate test of what matters more to the market: tighter supplies, or the lackluster demand picture.
- That will likely bring more uncertainty over the direction of prices — a complicated development for the Federal Reserve and the world’s central bankers in their ongoing battle against inflation.
- All eyes are on the latest CPI inflation reading this week along with the beginning of earnings season.
- With CPI, has the Fed beaten back inflation or will the sticky core pressure continue higher?
- Even as inflation has remained elevated, how much can the Fed hike & keep rates elevated?
- No matter what the answers to these questions are, the fact remains that access to capital has tightened tremendously so far in 2023 and a slowdown of some kind most likely is under way.
- The Atlanta Fed’s GDPNow model is currently forecasting 1st quarter GDP growth of 1.5%, down from its peak estimate of 3.5% in March. 1
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 4/6/2023
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