Market Update

Domestic equity markets finished the week higher. Earnings season kicked into high gear this week as many companies delivered first-quarter results. Major companies like Google and Microsoft beat earnings estimates. Since these companies comprise a large chunk of the S&P 500, their outperformance helped to boost the index as a whole. As we continue to follow the inflation narrative, Federal Reserve officials failed to commit to rate hikes at the next meeting. This would mean a pause to rate hikes and likely boost the S&P 500.

U.S. equity markets finished the week down. U.S. paychecks are now outpacing inflation leading to increased purchasing power on the part of the consumer. However, the recent wage growth comes at a time when American credit card balances are rising. According to earnings reports from Bank Of America, JP Morgan, and the like, first quarter (2023) spending is up 10.5% from this time last year. The more consumers utilize high-rate debt to address needs, the less they have to spend on wants which the economy relies on. The Federal Reserve’s Beige Book confirmed expectations that the U.S. economy is slowing. The Beige Book is published eight times per year and highlights econmic conditions within each Federal Reserve Bank District. The report noted tightening lending standards and flat consumer spending. The data supports rate-hike pauses at the next Fed meeting in two weeks.

U.S. equity markets finished the week higher as pricing pressures cool further. The Consumer Price Index (CPI), the Federal Reserve’s actual inflation gauge, inched lower to 5% (excluding food and energy the number is 5.6%). While recent data is still far above the central bank’s 2% target, inflation growth continues to drop from June’s 9.1% peak. Minutes from the FOMC’S March meeting showed the central bank is forecasting a mild recession starting in the second half of 2023. Important to note, stock markets climbed in the face of the Fed’s recession forecast. What does this tell us? The inflation narrative is still running the markets.

Domestic equity markets finished the week mixed as labor and manufacturing activity swayed stock markets. The Bureau of Labor Statistic’s (BLS’s) monthly labor report (JOLTS) showed 1.3 million jobs were removed from the economy. Remember, the Fed had two goals when it began rate hikes – to kill housing and cool the job market. Its rate hikes may finally be affecting the labor market meaning fewer hikes would be needed in the future. As a result, stocks responded well. Manufacturing activity showed contractions across the board which pulled equity markets in the other direction.

U.S. stock markets soared this week on positive inflation news. A key gauge of U.S. inflation rose by less than expected and consumer spending stabilized, suggesting the Federal Reserve could be close to ending its most aggressive rate hike cycle in decades.The key inflation gauge referenced is called personal consumption expenditures (PCE), which is the Fed’s preferred infaltion gauge.PCE dropped from 5.3% in January to 5% in February, suggesting inflation data continues to move in the right direction. Consumer spending numbers came in better than expected. Since consumer spending comprises two-thirds of domestic economic output, a stabilized spending report boosted the outlook for both the economy and stocks.

•Markets     •S&P 500   +1.4%     •Dow Jones +1.1%%     •NASDAQ   +2.2%     •Russell 2000   +0.01% Domestic equity markets finish the week higher. The past week marked a big week for stocks. Why? The Federal Open Market Committee (FOMC) raised interest rates by another 0.25%, and stated it will not cut rates until 2024. Inflation and interest rate policy have run stock markets for a couple years now. For equities to outperform on a week with seemingly poor inflation-related news is big. The Fed remains constant on its message and the markets appear to recognize that consistency.  Helping the inflation narrative was the fact that U.S. median sales price of previously owned homes dropped for the first time since 2012. This signals to the Fed that the housing market is cooling and it’s interest rate hikes are working.

•Markets     •S&P 500   +2.1%     •Dow Jones +0.1%     •NASDAQ   +6.5%     •Russell 2000   -1.7% Domestic equity markets finish the week mixed as inflation gauges ease and housing stabilization signs emerge in the face of bank failures. The U.S. Bureau of Labor Statistic’s Consumer Price Index (CPI) eased in February as prices rose 6% from the prior year. The Producer Price Index (PPI) eased at 4.6% annual growth. CPI and PPI are two separate inflation gauges the Fed uses to measure the economy, and each is moving lower. In housing, building permits stabalized in February boosting investor hopes for a turnaround in the housing market. Both the softening inflation figures and potential stabilization in housing struck in the face of two bank failures. Silicon Valley Bank and Signature Bank collapsed as customers lost confidence and sought to withdraw their deposits. First Republic Bank is…

Read more

Domestic equity markets finish the week down following Jerome Powell’s testimony, increasing payroll numbers, and high job openings. The Federal Reserve Chairman testified in front of Congress that inflation is hotter than expected. As a result, the Fed will increase interest rates higher than its previous guidance. Payroll and benefits administrator Automatic Data Processing (ADP) showed companies added 242,000 jobs in February, which was more than expected. And from a Fed perspective, more jobs leads to more inflation. The Job Openings and Labor Turnover Survey (JOLTS) remained unchanged at 1.9 jobs available for every 1 unemployed person. It likely means higher wages which means higher business costs and ultimately leads to higher inflation. The news of higher inflation and higher rates sent markets south.

Weekly Market Report for February 27-March 3, 2023 Markets S&P 500   +1.4% Dow Jones Industrial Average   +3.1% NASDAQ   +1.5% Russell 2000   +1.4% Domestic equity markets finished the week higher on declining U.S. home prices and positive services data. According to Redfin, home prices in the U.S. for February fell at the highest clip since 2012. Since housing makes up over 40% of the consumer price index (CPI) now, any decreases to home prices should reduce overall inflation. Stock markets welcomed this news. February data from the Institute of Supply Management (ISM) showed pricing pressures are easing as they relate to services. The ISM publishes data related to supply chains. Lower prices lead to lower inflation, which our U.S. equity markets appreciate. Even though the 10-year U.S. Treasury yield surged above 4% and hawkish (inclined to raise rates) Fedspeak followed, the housing and services numbers ran the show.…

Read more

Weekly Market Report for February 21-24, 2023 Markets S&P 500   -2% Dow Jones Industrial Average   -2.6% NASDAQ   -1.9% Russell 2000   -2.4% Domestic equity markets finished the week lower. Inflation narratives dominated headlines when the Federal Reserve’s preferred inflation gauge, personal consumption expenditures (PCE), inched higher. As a result, Wall Street forecasted that peak rates are rising. And when rates are anticipated to rise, stock markets tend to head south. Rate hikes also affect behavior. Individuals are less apt to spend money on goods and services when borrowing costs increase. And companies are less likely to engage in hiring, research and development, and other growth-oriented activities. Several macroeconomic factors continue to head in the wrong direction. This is fueling the rate-hike narrative. January’s payroll data is one such data point. It’s important to note that the Bureau of Labor Statistics (BLS) changed the methodology behind the payroll…

Read more