Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities finished the week mostly higher as large-cap tech earnings surprised to the upside.
- S&P 500 +0.90% Dow +0.86%, Russell 2000 -1.33%, Nasdaq +1.28%1
- The All-Country World Index gained +0.33%.1
- S&P 500 sub-sectors were extremely mixed last week.
- Most sectors were flat to slightly positive or negative.
- Technology led to the upside by a wide margin with a gain of over 2%.1
- The CBOE Volatility Index (VIX) dropped over 5% to end at its low of the year at 15.72. 1
- S&P 500 +0.90% Dow +0.86%, Russell 2000 -1.33%, Nasdaq +1.28%1
- US Treasury bond yields were slightly lower last week.
- US 2yr -0.13% at 4.04%, 10yr -0.13% to 3.44%, 30yr -0.11% to 3.67%.1
- After moving in tandem in ‘22, the 10yr Treasury & S&P have been negative correlated in ’23. 1
- Commodities as an aggregate asset class moved lower last week.
- WTI Crude declined -1.62%.1
- Gold rose +0.32%.1
- The US Dollar index lost -0.16%.1
- In our opinion, U.S. economic data continued to be mixed last week.
- 1st quarter GDP for the US came in below estimates at +1.1%.1
- Consumer confidence fell in April to a 9-month low. 1
- Wage growth in Q1 came in at +5.1%, well ahead of the Fed’s target. 1
- An index of equities outside the US (FTSE All-World ex-US) was flat last week. 1
Conclusion
- US Equities finished the week higher amidst early week downside pressure.
- Large-cap Tech earnings that beat lowered expectations helped propel indices higher.
- The small-cap Russell 2000 continues to paint a different picture of the economy than the large-cap benchmarks as it led to the downside with a loss over 1.3%.1
- The move higher in the indices continues to have very little breadth or participation and is concentrated mostly in the biggest technology names. 1
- For instance: Nvidia & Microsoft today make up over 8% of the S&P 500. 1
- Stronger-than-expected results from Meta, Microsoft and Alphabet last week may have allayed some concerns about the slowdown in demand for technology, but investor angst over the sector hasn’t completely dissipated.
- Even with US consumer spending rising at the fastest pace in almost two years, Amazon’s warning over lackluster growth in its cloud-computing business and Cloudflare’s move to cut its full-year revenue outlook underscore the uncertainty over the broader economy. 1
- S&P 500 subsectors were mixed last week.
- Technology & Communication Services continue to carry the broader indices in a disproportionate manner.
- Most sectors were little changed last week.
- US Treasury yields declined across the curve last week.
- Since the banking “issue”, the benchmark 10yr yield has been extremely rangebound.
- We believe yields have traded with a little bit of “wait & see” of what transpires next.
- All eyes will be on the Federal Reserve this week as their latest policy will be released Wednesday.
- Recent economic data shows that US inflation continues to accelerate, bolstering expectations the Federal will keep raising rates and heightening the chances of a demand-sapping recession.
- Market participants anticipate a 0.25% increase to the Fed Funds rate this week. 1
- The Fed’s forward guidance will be in clear focus as what they say will be scrutinized heavily.
- The Fed has consistently said that they’ll keep rates “higher for longer” while market participants are pricing in several rate cuts by the end of 2023.
- This difference can be seen in the differing behaviors of the bond market & equities.
- While officials’ efforts have helped to reduce price pressures in the US economy, inflation remains well above their goal.
- At the same time, first-quarter growth figures this past week pointed to an economy that’s downshifting.
- We believe that the monthly jobs report on Friday will give a sense of how labor demand is holding up.
- Recent economic data shows that US inflation continues to accelerate, bolstering expectations the Federal will keep raising rates and heightening the chances of a demand-sapping recession.
- Earnings season is well underway with 53% of S&P 500 companies reporting earnings so far. 1
- 79% of companies have beaten earnings per share expectations while 74% have reported positive revenue results. 1
- Blended earnings have declined -3.7% so far this quarter. 1
- Forward guidance has been extremely mixed as executive’s outlooks remain uncertain.
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 4/28/2023
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