Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

Data

• U.S. equity indices were all lower last week.
  • S&P 500 -1.41% Dow -1.90%, Russell 2000 -0.95%, Nasdaq -1.76%1
    • The All-Country World Index declined 1.72%.1 
  • S&P 500 sub-sectors were mostly lower last week.
    • Consumer Staples was the only positive sector with a gain of over 1%.1
    • Energy & Financials led to the downside. 1
  • The CBOE Volatility Index (VIX) gained over 1.54% to end at 27.78. 1 

• US Treasury bond yields moved lower last week.
  • US 2yr -0.04% at 1.46%, 10yr -0.03% at 1.93%, 30yr -0.01% to 2.25%.1
  • Short maturities came down more than the longer end; opposite of recent price action.

• Commodities as an aggregate asset class were mixed last week.
  • WTI Crude lost -1.55%.1
  • Gold rose 2.07%.1
  • The US Dollar index was flat at +0.01%.1 

• In our opinion, U.S. economic data was mixed last week.
  • Inflation pressures continued as the Producer Price Index jumped to +9.7% year over year. 1 
  • Retail sales rebounded in January with a big jump of 3.8%.1
  • Mixed data was reported from the housing market as higher mortgage rates continue. 1 

• An index of equities outside the US (FTSE All-World ex-US) declined 0.48%.1 

Conclusion

• US stock markets ended a volatile week all lower.
  • Geopolitical tensions in Europe seemed to take the lead on the “market concern” front while uncertainty surrounding the Federal Reserve’s path forward remains prevalent.
  • The Dow Jones Industrial Average led to the downside with a loss of 1.90%.1
    • Small-caps were the “best” performing broad area of the equity markets with a loss of less than 1%.1
  • Interesting to note that the S&P 500’s decline of 1.41% happened on the back of lighter than normal volume. 1
    • The final 2 days of trading last week saw volumes come in 12% below their 30 day avg. 1 

• S&P 500 subsectors were all negative last week with the exception of one
  • The defensive Consumer Staples area of the market squeezed out a gain last week.
  • Energy & Financials, the 2 best performing year-to-date sectors, led to the downside.
    • Energy seemed to sell-off as crude oil dropped on the week from its recent high in the mid-$90s per barrel. 1
    • Financials sold off on the back of long-term bond yields coming down.
    • The financial sector has recently ignored significant flattening of the yield curve which as we’ve pointed out is counter to historical price movement.
    • We believe if there is further broad weakness in equities, financials could see a catch-down quickly. 

• .The US Treasury market saw bond yields move lower across the maturity curve
  • The move lower was mostly felt in the shorter 2yr & 5yr yields.
  • This caused the yield difference between the short-end and longer 10yr & 30yr maturities to increase.
    • This was the opposite of recent price action in the extremely large bond market.
    • We believe this was as a result of Federal Reserve minutes being interpreted as less hawkish than the market expected.
  • Increased volatility in the bond market could be causing some erosion of liquidity.
    • This could be something to continue to monitor as the Fed also starts to taper off its purchased of US gov’t bonds. 

• Earnings season for the S&P 500 is winding down with 84% of companies reporting quarterly results.
  • 77% of companies have reported positive earnings & 78% beat revenue per share results. 1
  • The blended earnings growth rate for the S&P 500 thus far is 30.9%.1
    • Compare this with estimate before reporting began of 21.2%.1
  • We continue to caution spending too much time on this past quarter’s earnings as future results will be up against less pandemic affected numbers from the previous year. 

• All eyes this week will be on the Ukraine/NATO vs. Russia as well as several critical data releases.
  • So far in ’22, major domestic indices are down -8% to -14% and the VIX “fear gauge” is already elevated1 as market participants remain cautious.
  • We continue to monitor the data and will remain diligent on responding accordingly. 

Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer

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

 1 Source: Bloomberg – 2/18/2022

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