 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, Small Business, CPI, FRB Minutes, PPI, Jobs, Earnings |
The week was all about inflation data, but have we inflated its importance?
Monday S&P 500 0.04% | NASDAQ 0.03%
Markets were little changed on the day. There was very little economic news out before the bell on Monday. The week will likely be sharply focused on Wednesday when we get the updated figures for March inflation. The report is expected to show an increase from February.
Tuesday S&P 500 0.14% | NASDAQ 0.32%
Small business sentiment slipped in March to the lowest level since January 2013! Even still, markets advanced ahead of inflation data on Wednesday. Growth stocks out-performed which signals that an increase of inflation data would likely not hamper growth stock leadership. This is important because the rate cuts expected later this year would favor growth stocks most.
Wednesday S&P 500 0.95% | NASDAQ 0.84%
Consumer Price Index (CPI) information showed that inflation has stopped cooling. A 0.1% reading was replaced with a 0.4% reading. The main culprits were transportation services, energy, and home services. The markets moved sharply lower, but likely on the Federal Reserve Board (FRB) minutes release, rather than on CPI data. FRB Minutes showed concerns that inflation was stagnating, endangering the likelihood of the FRB cutting rates later this year.
Thursday S&P 500 0.74% | NASDAQ 1.68%
Producer Price Index (PPI), which is a proxy for wholesale inflation rose less than expected. Initial jobless claims fell on the day supporting a strong job market. The weaker than expected inflation data led to a bounce back rally by markets. Little was changed about rate cut expectations moving forward however, given the FRB minutes from March.
Friday S&P 500 1.46% | NASDAQ 1.62%
Michigan Consumer Sentiment is projected to slip, but remains in the high 70’s. Financial firms got earnings season underway on Friday and they did not impress. The slide on Friday solidified a down week for equities. The Nasdaq led markets lower on the day, but its Thursday rebound mitigated losses for the week.
Conclusion S&P 500 1.56% | NASDAQ 0.45%
The week ended well into the red. The fall represented the worst week for the S&P 500 since January. In January the focus was on the markets accepting that the FRB may only cut rates three times this year. This time it is on the realization that perhaps the FRB may not cut rates at all. As of now investor expectations are that the FRB will cut rates one, maybe two times (September and December). The meeting in two weeks should provide more clarity. Even with this change to rate cut expectations, it will be interesting to see what action the FRB takes with Quantitative Tightening. If they do start to slow the selling bonds that should provide some relief.
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Markets moved north last week. Is the S&P 500 finding its legs or is there cause for concern?
Monday
Markets were mostly flat to open the week. A great signal after ending last week in record territory for the S&P 500. Holding on to those gains may signal more ahead.
Tuesday
The S&P 500 was flat on the day as treasuries got a bid. This is a move that seems to signal investors are beginning to accept Federal Reserve direction. A bid to treasuries is a concession that inflation is likely to not carry as much concern as originally expected.
Wednesday
In a continued bid for safe haven securities, equity markets ended the day slightly lower. The 10-year treasury was getting a bid as it ended the day at 1.47%. This was the lowest level since the beginning of March.
Thursday
Markets climbed on Thursday. CPI data released showed robust growth of inflation, which typically would elicit a falling market. This indicates that while the number was high (Core CPI at 3.8%) it is not expected that inflation will persist.
Friday
As of late, the end of the week has been generally telling for investor sentiment. The data has been light, leaving investor response to really signal what risks the weekend may hold. This Friday we got favorable consumer sentiment projections and a rise in markets. This indicates that the weekends news cycle is not of major concern.
Conclusion
The S&P 500 rose by 0.41% for the week. Movement was fairly muted, but investor sentiment was strong. The volatility could tick up from here as volumes will moderate over the summer months. Lighter volume typically brings choppier waters.
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Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.