It was a soft patch in the market last week. Will it continue or was sentiment more temporal?
Monday
Markets opened the week down. Growth momentum stocks pulled back more so than value stocks. Additionally, the dollar firmed as interest rates spiked the prior week. Movement in longer term rates was expected later this year but has come about much earlier. This could cause a fragile high yield market to show some cracks sooner rather than later.
Tuesday
Activity on Tuesday appeared light as the S&P closed with about a 1 point change. Internal data for the day point to a bid on energy shares and weakness in real estate shares. Crude oil inventories fell last week more than expected, supporting the price move. Also, Job openings reported Tuesday pointed to a reduction in job availability.
Wednesday
Market movement was a little more notable on Wednesday as the S&P 500 rose .3%. Volatility is down in the 22 range, for reference the long-term average for volatility is around 21.
Thursday
Markets were positive most of the day. Those gains evaporated late as investors became more guarded about the stimulus that was announced after hours. There were big concerns about references to future taxation to pay for the measures.
Friday
Investors did not want to be long the market, heading into a holiday lengthened weekend. Markets ended the week down 0.72% on Friday. Economic data was soft as producer prices (a precursor to inflation) held steady at 0.8%. Retail sales also retreated 0.7% month over month in December. Also, Michigan consumer sentiment is projected to slip to 79.2 in January. The soft patch in economic data, while expected, was softer than expected. On a positive note, capacity utilization, a measure of corporate resource use, rose to 74.5% in December. This beat expectations and signals that while we are seeing a consumer soft patch. Corporate sentiment signals a restocking of inventories for coming demand.
Conclusion
The week overall carried a negative tone on markets. Across the week the S&P 500 gave back 1.48%. This came on higher rates, a stronger dollar, stimulus talk, potential taxation, and a soft patch in economic data.
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