 | 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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It was a quiet week for markets. Is this just the calm before the storm, or should we expect this to continue?
Monday
Markets were little changed on Monday. Literally the S&P 500 fell 0.05 points on the day. Oil occupied attention on the day as OPEC+ did not agree to increase production. This will likely leave us with elevated fuel prices for some time. In response, the US is considering releasing some strategic reserves to ease prices slightly, but no action was taken.
Tuesday
Retail sales dominated focus on Tuesday as they jumped a surprising 1.7% in October. This led to a buy sentiment among investors as the S&P 500 gained 0.38% on the day. This was either a sign of things to come or people getting ahead of anticipated inventory shortages this holiday season. To be determined…
Wednesday
Inflation concerns were stoked on Wednesday as oil inventories shrank when they were expected to expand. The S&P 500 contracted 0.26% on the day as those fears were in focus.
Thursday
All that was lost on Wednesday was recaptured on Thursday. Jobs data released showed that once again the pandemic job market is improving. Initial jobless claims fell to 268K, the lowest since the start of the pandemic. More importantly, on-going claims have fallen to 2.080M, again another low. The pre-pandemic level was roughly 1.7M.
Friday
COVID closures dominated the headlines and the market on Friday. With no economic data reporting on Friday, the focus was squarely on Austria. COVID closures may become more prevalent in coming weeks as colder weather sets in on Europe. Markets slipped, but not hard. The S&P 500 dropped 0.13% on the day.
Conclusion
The S&P 500 gained 0.32% on the week. Not a particularly interesting week, however, expect the volume on trading to ratchet up after the upcoming holiday. The debt ceiling still needs resolving by December 3rd. Unfortunately, rather than being resolved in the 11th hour, this may push out days passed that deadline. The treasury projects that they have the funds to keep the lights on till 12-15-21. We may see political wrangling until closer to that date. That wrangling will likely cause market volatility.
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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.