 | 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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Last week felt like Opposite Day. Will this continue or will data begin to be better represented on the markets?
Monday S&P 500 3.20% | NASDAQ 4.29%
Markets tumbled to open the week. The elevated volatility makes the day’s move far too common. The interesting move on the day was that it was a red day for most sectors. Equities and oil will contradict each other typically, however, they all fell on the day. The 2-year and 10-year yields both fell for the day (Yields and prices move in opposite directions). It what appear to be a safe haven bid for markets.
Tuesday S&P 500 0.25% | NASDAQ 0.98%
The day started firmly in the green as markets attempted to rebound losses from Monday. Those faded as the day wore on, but markets did remain in the green. Also making gains, was treasury prices as yields fell slightly.
Wednesday S&P 500 1.65% | NASDAQ 3.18%
Consumer Price Index (CPI) data came out on Wednesday. It showed that inflation softens slightly year over year, but less than was expected. The resilience of inflation will likely mean the aggressive nature of the Federal Reserve Board (FRB) should continue.
Thursday S&P 500 0.13% | NASDAQ 0.06%
Jobs data showed continued strength in the job market, to no one’s surprise. Additionally, the Producer Price Index (PPI) showed corporate inflationary pressure is persisting. PPI measures input costs for companies and is often a tell on if consumers should expect retail prices to rise. Markets were little changed on the day.
Friday S&P 500 2.39% | NASDAQ 3.82%
Markets rallied broadly on Friday. This was in spite of Consumer Confidence coming in weaker than expected. It is not surprising, as a weaker consumer creates less inflationary pressure. Less inflationary pressure means less cause for the FRB to be more aggressive on rates.
Conclusion S&P 500 2.41% | NASDAQ 2.80%
My kids like to play opposite day quite frequently. Yeah Dad, I cleaned my room… nope… Yeah Dad, I emptied the dish washer… really… Apparently, the stock market is taking a lesson from my kiddos. Good economic data, while good for the economy, signals a more aggressive FRB which will hurt future earnings prospects. Bad economic data, while bad for the economy, signals a more restrained FRB and therefore bodes well for future earnings. Look for opposite day to last the next year or so…
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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.