Inflation Retreat Stocks treaded water ahead of last week’s inflation data and the start of a new earnings season. Stocks rallied on a favorable March consumer inflation report, only to falter after the release of last month’s Federal Open Market Committee (FOMC) meeting minutes, which hinted at a potential recession later this year. After reports of a more pronounced slowdown in producer prices on Thursday, stocks surged higher, with technology and communication services companies leading the charge. A weak retail sales number on Friday shaved the gains to close out the week. |
Market Update1 |
Observations
Domestically, small cap (+1.54%) and mid cap (+1.43%) stocks improved more than large caps. Bonds, both domestic and global, were negative for the week, but U.S. corporate credit was positive. The Bloomberg U.S. and Global Aggregate Bond Indices returned -0.48 % and -0.47%, respectively. The Bloomberg U.S. Corporate High Yield TR USD advanced +0.76%. |
Banks Are Finally Facing Pressure to Pay Depositors More: Depositors fled to the perceived safety of the titans of finance following a pair of bank failures last month. A raft of earnings this week will show just how costly the run was for everyone else. Small and midsize U.S. banks lost hundreds of billions of dollars in recent weeks to their bigger peers and to money-market funds offering higher yields. That is likely to force many of them to increase the interest rates they are paying to avoid losing more customers. The extent of the damage will become clearer when dozens of regional banks including M&T Bank Corp., U.S. Bancorp and Citizens Financial Group Inc. begin to report first-quarter results. Investors, analysts and central bankers are likely to pore over the results looking for clues about the health of the financial system and the broader economy. “It’s maybe the most critical, sensitive quarter they’re ever going to report in,” said Mike Brauneis, managing director and global financial services industry leader at Protiviti, a management-consulting firm.2 SpaceX Postpones Starship Rocket Launch Attempt After Technical Problem: SOUTH PADRE ISLAND, Texas—SpaceX postponed trying to launch Starship on Monday, delaying the initial launch of the immense rocket the company has been pushing to start testing in flight. The company faced a pressure-related problem as it was trying to fuel up the large booster designed to power Starship off the launchpad, according to a SpaceX live stream and Elon Musk, the company’s founder. “A pressurant valve appears to be frozen,” Mr. Musk said in a tweet. It will take the company at least 48 hours before it is able to try to blast off the rocket on the test flight. In a tweet, the company confirmed it was standing down but didn’t specify when it might attempt a flight again. Meanwhile, SpaceX teams continued with fueling the vehicle as a practice run for future attempts. On Sunday, SpaceX founder Mr. Musk worked to play down expectations about the launch, discussing potential risks related to the flight and technical challenges. The executive said he was concerned that a problem with the powerful engines installed on Starship’s Super Heavy booster could end up destroying part of the rocket or the launchpad. However, SpaceX didn’t face those risks, at least on Monday. Instead, the massive rocket remained standing on the pad. Fueling up rockets can be challenging, especially given fuel properties and complex valve systems.3 Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley. 1. Data Obtained from Morningstar as of 4/14/2023 |
Economic Definitions CPI (headline and core): Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate. Retail Sales: Retail sales (also referred to as retail trade) tracks the resale of new and used goods to the general public, for personal or household consumption. This concept is based on the value of goods sold. Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America. Producer Prices - PPI (headline and core): Producer prices (output) are a measure of the change in the price of goods as they leave their place of production (i.e. prices received by domestic producers for their outputs either on the domestic or foreign market). Building Permits: This concept tracks the number of permits that have been issued for new construction, additions to pre-existing structures or major renovations. These statistics are based on the number of construction permits approved. Housing Starts: Housing (or building) starts track the number of new housing units (or buildings) that have been started during the reference period. The Conference Board Leading Economic Index® (LEI) for the U.S.: The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by around 7 months. Index Definitions S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971. Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928. Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978. MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East. MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency). Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded. Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds. Disclosures The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. 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4/14 Market View Weekly: By the Numbers
April 18, 2023