Weekly Market Report: March 15th, 2023
Markets last week took in an economic calendar with additional warmer inflation data points and the associated policy speculation and interest rate volatility. The S&P 500 did mark another record high close (Tuesday) but closed marginally lower on the week (-0.13%, +7.28% YTD) in what was its first back-to-back weekly decline since October. Non-U.S. developed (-0.45%) and emerging (-0.12%) markets both closed slightly lower as well, thanks in part to another week of USD strengthening, at least partially on the “higher for longer” narrative. Bond yields moved notably higher on the week with the 10yr (4.31%) closing back at its February highs. The commodity complex traded broadly higher with WTI oil (+3.88%) and industrial metals both getting solid bids on the week.
Market Anecdotes
- More questions surrounding the progress and trajectory of inflation dynamics surfaced last week with more warm inflation readings (PPI, CPI) which may or may not translate to Fed policy.
- Gradually shifting equity market dynamics over the past month includes cyclical leadership and an increase in stocks trading above their 200-day moving average despite a few of the ‘magnificents’ falling over the same time period.
- Bespoke pointed out that at 517 days, this bull market is sitting exactly at the median bull market duration, but well below the average 1,011 days thanks to the lengthy bull market runs of the past few decades.
- The FOMC and BoJ both meet this week with the former expected to hold but the latter expected to end its negative short term rates and end its seven year yield curve control program.
- With spreads in high yield (315) tightening 133 bps and investment grade (94) by 39bps since their near-term October 2023 highs, it begs the question how much lower can they go? The answer of course depends on the economic outlook.
- A refreshed look at the GDP growth backdrop provides a worthy reminder that falling inflation can paint decelerating nominal GDP growth with a brush of accelerating real GDP growth.
- Bianco Research pulled one from the vault by revisiting the internet bubble tech sector rise and fall as a history lesson possibly pertaining to the current AI craze. The rise in the market has translated to a self fulfilling rise in bullish sentiment and equity market inflows.
Economic Release Highlights
- February YOY headline and core CPI registered (3.2% vs 3.1%) and (3.8% v 3.7%) respectively with MOM readings of (0.4% v 0.4%) and (0.4% v 0.3%).
- February YOY headline (1.6% v 1.2%) and core (2%) PPI along with MOM readings of (0.6% v 0.3%) came in well ahead of expectations.
- Retails Sales in February were generally in line with consensus on the headline (0.6% v 0.7%), Ex-Vehicles (0.4% v 0.4%), and Ex-Vehicles & Gas (0.3% v 0.2%) readings.
- February Industrial Production of 0.1% was in line with the 0% spot forecast and consensus range of -0.5% to 0.2%. Manufacturing Output beat on the upside (0.8% v 0%).
- UofM Consumer Sentiment in March registered 76.5, generally in line with the 77.3 spot forecast and range of 75 to 78.3
