Market Update—Week of April 03, 2023

Market Update—Week of April 03, 2023

April 03, 2023

Quick Hits

1. Report releases: Personal income and spending both rose in February
2. Financial market data: Large and growth stocks led the way to start the year  
3. Looking ahead: All eyes will be on Friday’s release of March employment data

Report Releases: March 27–March 31, 2023

Retail Inventories, February (Tuesday)

Retail inventories rose more than expected in February with a 0.8 percent increase versus an expected 0.1 percent increase. This was well above the 0.3 percent increase in January.

Conference Board Consumer Confidence, March (Tuesday)


Consumer confidence increased more than expected in March, driven by improved consumer expectations for future economic conditions.

  • Expected/Prior Consumer Confidence Index: 101.0/103.4
  • Actual Consumer Confidence Index: 104.2

 

Core Personal Consumption Expenditures (PCE) (Thursday)


The Federal Reserve (Fed)’s inflation gauge in core PCE rose 4.4 percent in the fourth quarter, which was at the higher end of estimates. The deflator released on Friday hinted at signs that easing may be seen in the first quarter.

 

Personal Spending and Personal Income, February (Friday)

Personal spending and income grew in February following increases in January. Personal income increased slightly more than expected while spending growth came in just below. This marks two consecutive months with spending growth to start the year, signaling continued consumer strength.

  • Expected/Prior Personal Income Monthly Change: +0.2%/+0.6%
  • Actual Personal Income Change: +0.3%
  • Expected/Prior Personal Spending Monthly Change: +0.3%/+2.0%
  • Actual Personal Spending Change: +0.2%

 

The Takeaway

  • Retail inventories and the core PCE hint at potential easing within inflation.
  • The easing via inventories and core PCE, however, was offset with a slight improvement in consumer confidence and continued rising incomes. We’ve recently seen notable markdowns from companies in the retail sector.

 

Financial Market Data

Equity

IndexWeek-to-DateMonth-to-DateYear-to-Date12-Month
S&P 5003.50%3.67%7.50%–7.73%
Nasdaq Composite3.38%6.78%17.05%–13.28%
DJIA3.22%2.08%0.93%–1.98%
MSCI EAFE4.02%2.48%8.47%–1.38%
MSCI Emerging Markets1.95%3.03%3.96%–10.70%
Russell 20003.96%–4.78%2.74%–11.61%

Source: Bloomberg, as of March 31, 2023

Global equities were up across the board last week as markets rose for the third consecutive week to close out the quarter. A lack of news on the regional banking side eased market fears and saw equities move higher. Small caps and value stocks outperformed despite a more challenging month for both than large-cap growth stocks.

Fixed Income

IndexMonth-to-DateYear-to-Date12-Month
U.S. Broad Market2.54%2.96%–4.78%
U.S. Treasury2.89%3.01%–4.51%
U.S. Mortgages1.95%2.53%–4.85%
Municipal Bond2.22%2.78%0.26%

Source: Bloomberg, as of March 31, 2023

The front end of the yield curve moved higher last week. Increasing consumer confidence and personal income hinted at potential additional work from the Fed on inflation. The 2-year, 5-year, 10-year, and 30-year rose 29 basis points (bps) (to 4.06 percent), 20 bps (to 3.61 percent), 11 bps (to 3.49 percent), and 5 bps (to 3.69 percent), respectively. Regional banks were mostly flat as nerves calmed a bit since the concerns in early March, and the moves in rate show a moderate reversal of the shock in rates
from that timeframe.

The Takeaway

  • The S&P 500 rose for the third week in a row as investors shake off banking jitters.
  • Treasuries sold off as investors revisited equities in the last week of the quarter.

 

Looking Ahead

Investors will be focused on the March employment report, slated to be released on Friday.

  • The week will kick off on Monday with the ISM manufacturing report for March. The index is expected to fall to 47.5, which would leave it in contractionary territory.
  • Wednesday will see the release of both the international trade report and ISM Services index. The February international trade report is set to show a modestly wider trade deficit during the month compared to January. Service sector confidence is expected to decline in March, but the index is set to remain in expansionary territory despite the anticipated drop.
  • Finally, the employment report for March will be published on Friday. Economists expect to see that 240,000 jobs were added, which would be a strong month for job growth. The unemployment rate is set to remain unchanged at 3.6 percent.  

 

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

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Authored by the Investment Research team at Commonwealth Financial Network.

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