Equities Mostly Drop Due To Mixed Economic Data

Market Down and Dirty

Last Week’s Economic/Market Summary

Data

• S. equities mostly fell as recent economic data came in mixed.
  • S&P 500 -0.26% Dow +0.62% Russell 2000 -1.64%, Nasdaq -1.90%[1]
    • The All-Country World Index was lower by -0.70%.1
  • S&P 500 sub-sectors were mostly deeply negative last week.
    • Energy led to the upside with a gain of 1.25%.1
    • Technology & Utilities led to the downside with losses over 3%.1
  • The CBOE Volatility Index (VIX) declined -13.22% to end at 14.84. 1

• US Treasury bond yields moved firmly higher last week.
  • US 2yr +0.11% at 4.89%, 10yr +0.11% to 4.16%, 30yr +0.06% to 4.27%.1
  • The benchmark 10yr yield crossed 4.2% on the week, the previous high level of ’23. 1
• Commodities as an aggregate asset class were mixed last week.
  • WTI Crude rose +0.27%.1
  • Gold was down -1.51%.1
  • The US Dollar index gained +0.82%.1
• In our opinion, U.S. economic data continued to be mixed last week.
  • Inflation measures were mixed with CPI meeting expectations and PPI higher. 1
  • US credit card balances crossed the $1 trillion level for the first time in history. 1
  • Small business optimism reached an 8-month high. 1
• An index of equities outside the US (FTSE All-World ex-US) declined -0.77%.1

Conclusion

• US Equities declined as inflation reports clouded the future of central bank policy and concerns of a major economic slowdown in China reemerged.
  • Growth oriented indices led to the downside as the S&P 500 declined -0.3%.1
    • The Nasdaq 100 capped a two-week retreat in which it fell 4.6%.1
  • While equity benchmarks finished the week with one of their smallest weekly changes of 2023, the moves during the day have been telling a different story.
    • The intraday moves were the widest since June and double their levels in July.
    • The wide swings showed a mid-day move of greater than 1.1% to wipe out gains twice within the last 6 trading days. 1
• S&P 500 subsectors were surprisingly mixed last week.
  • Energy led to the upside with a gain of over 3% while crude barely finished the week positive. 1
    • Healthcare & Utilities also posted solid gains above 1%.1
  • The leaders so far in ’23 were the weekly lagging sectors as Technology saw the biggest decline.

• US Treasury yields rose across the curve with the largest moves coming from the 10yr and longer.
  • The rates market is wading through a confluence of information from economic data releases & Federal Reserve speakers leading up to the release of the Fed’s latest meeting minutes.
  • The annual gathering of global central bankers is later this month in Jackson Hole, Wyoming & will also be closely watched.
    • This platform could give Powell a spot to push back on markets pricing in that the Fed will cut its key rate to around 4% by January 2025. It’s in the 5.25-5.5% range now. 1
  • The opposite of the quick Fed interest rate cut environment is being called “Higher for Longer”.
    • While this isn’t how the markets are currently pricing probable economic outcomes, this could pick up steam if key inputs to inflation measures continue to stay elevated, such as wage pressure.
• Commodities were mixed last week as Oil slugged out a slight gain.
  • Oil has rallied since the late June Saudia production cuts despite the uncertainty surrounding demand given the Fed’s aggressive monetary tightening policies.
  • Copper declined over 3% last week as Chinese economic data continues to fall short of expectations. 1
  • The US Dollar continues to put pressure on many aspects of the global economy as it strengthened once again last week.
• Many eyes this week will be on retail sales and earnings reports from some large representatives of this area of the domestic economy.
  • Since the end of May, the S&P Retail Industry Index has more than doubled the gain for the broader S&P 500. 1
    • Surprising strength in retail sales bolstered bulls’ case that Americans are still spending.
  • This has come despite credit card balances rising to an all-time-high with the average interest rate north of 20%.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

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

 1 Source: Bloomberg – 8/11/2023 

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