Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

Data

• U.S. equities finished the week little changed outside of the Nasdaq.
  • S&P 500 +0.33% Dow -1.00% Russell 2000 +0.02%, Nasdaq +2.51%1
    • The All-Country World Index declined -0.51%.1
  • S&P 500 sub-sectors were mostly deeply negative last week.
    • Tech & Consumer Discretionary were the only positive sectors. 1
    • Materials & Staples led to the downside with losses over 3%.1
  • The CBOE Volatility Index (VIX) rose 6.60% to end at 17.92. 1
• US Treasury bond yields were higher last week across the yield curve.
  • US 2yr +0.26% at 4.54%, 10yr +0.10% to 3.80%, 30yr +0.01% to 3.96%.1
  • Yields continue to push back to their 2023 high levels.
• Commodities as an aggregate asset class moved lower last week.
  • WTI Crude rose +1.83%.1
  • Gold declined -1.60%.1
  • The US Dollar index gained +0.99%.1
• In our opinion, U.S. economic data continued to be mixed last week.
  • Measures of inflation came in higher than expected. 1
  • Consumer spending once again exceeded forecasts. 1
  • US GDP for the 1st quarter was revised higher to 1.3%.1
• An index of equities outside the US (FTSE All-World ex-US) declined -1.43% last week. 1

Conclusion

• US Equities were mostly flat last week as the Dow Jones Industrial Average declined a percent while the Nasdaq climbed for the 5th straight week with a 3.6% gain.
  • The Nasdaq led to the upside by a wide margin on the back of Nvidia Corp gaining $190 billion last week on the back of stellar earnings & a lifted forward forecast. 1
    • The Nasdaq and broader indices continue to be led higher but just a few technology companies names that are attracting a lot of capital.
  • Outside of tech, equity gains have been muted on the back of stronger than expected economic & inflation data that puts additional Federal Reserve rate hikes on the table.
• S&P 500 subsectors were mostly lower last week.
  • The AI hype helped Tech & Consumer Discretionary sectors continued to lead higher.
  • All other sectors were negative last week with most down over 1.5%.
• US Treasury yields were higher across the yield curve last week.
  • The 10-year rate exceeded 3.85%, up from a year-to-date low under 3.25% in April. 1
  • Yield increases in recent weeks have been led by shorter maturities though, reflecting increased expectations for the Fed to increase their benchmark interest rate.
    • Fed minutes released last week reflected a significant uncertainty about policy in the coming months from committee voters. 1
• Commodities continued to come under pressure last week as crude oil rose a bit while gold & copper both lost over 1%.1
  • We believe much of oil’s struggle this year is in response to the lackluster “China reopening” demand that was anticipated earlier in the year & the federal reserve’s aggressive tightening.
  • Copper saw fresh selling as institutional investors flipped net short for the 1st time since ’20. 1
    • Copper, often viewed as an economic bellwether for its use across sectors from construction to electronics, has been under mounting pressure after official data pointed to weak demand from the world’s top consumer, China.
• The year-to-date outperformance of the market-cap weighted S&P 500 vs the equal-weight version rose further last week as the “average stock” struggles while the biggest of big continue to show strength.
  • The performance difference is not at historical highs only seen 2 other times, the last of which occurring in 1999. 1
  • We continue to believe that either breadth will widen and many S&P companies will play catch-up OR the biggest names that have outperformed YTD will catch-down to the rest of the market.
• With a tentative deal pending in D.C., the Treasury will soon replenish its cash balance by selling more than $1 trillion of bills through the end of the third quarter. 1
  • A flood of issuance is likely to suck a significant amount of liquidity out of financial markets & could add pressure to a financial system that’s still showing signs of strain.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

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

 1 Source: Bloomberg – 5/26/2023 

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